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» Level 3 Communications Inc. Presents at Citi Global Entertainment, Media & Telecommunications Conference, Jan-05-2012 11:10 AM
I need to cover our Safe Harbor statement which can be found on Page 2 of our 2Q '12 earnings presentation, which says that information on this call and in the presentation contain financial estimates and other forward-looking statements that are subject to risks and uncertainties. Actual results may vary significantly from those statements. A discussion of factors that may affect future results is contained in Level 3's filings with the Securities and Exchange Commission.Finally, please note that on today's call and in the earnings presentation 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 Q. Crowe Thanks, Valerie. In our prepared remarks, Sunit Patel will discuss financial results for the quarter and the outlook for the balance of the year. Jeff Storey will discuss operational matters, including segment results, provide an update on the status of integration planning and implementation. And I'll provide a short summary, and we'll open it up for questions. Sunit? Sunit S. Patel Thank you, Jim, and good morning, everyone. I'd like to begin with some of the highlights for the quarter, which can be found on Slide 3 of our presentation. Overall, Core Network Services revenue grew 0.7% sequentially on a constant currency basis, with our enterprise business continuing to be a strong growth driver. Adjusted EBITDA increased to $353 million. We are on track to achieve our EBITDA guidance for 2012 and we continue to make progress this quarter in achieving EBITDA synergies. Turning to the detailed results for the second quarter 2012 on Slide 4. Core Network Services grew 0.7% sequentially on a constant currency basis. This growth was primarily driven by our enterprise customers in all regions. Excluding U.K. government revenue, the company's consolidated CNS revenue grew 1.2% and enterprise CNS grew 2.1% on a constant currency basis.
On a year-over-year basis, CNS revenues grew 3.7%, adjusting for constant currency. Keep in mind, in the second quarter 2011, Global Crossing had $9 million in termination revenue, which if excluded would improve our year-over-year revenue performance.On another positive note, our consolidated CNS sales orders, that is signed contracts for services, grew 17% in the second quarter over the first quarter. The second quarter marked a record quarter for sales orders for the combined company. On a regional basis, North American CNS revenue grew 1.1% sequentially and on a constant currency basis, primarily from strong sequential growth of 1.8% from our enterprise customers. Wholesale was roughly flat compared to the first quarter. In EMEA, our sequential CNS revenue declined 2.3% on a constant currency basis, primarily driven by an expected decline in the U.K. government revenue. As we have previously indicated, we expect our U.K. government revenue to decline this year. On a constant constants basis, wholesale CNS revenues declined 1.1% while enterprise CNS revenues improved 2.5% sequentially. Excluding the U.K. government business, EMEA CNS revenue grew 0.6%. Our sales order in the EMEA enterprise business improved nicely for the second quarter, and although EMEA is still in a state of transition, we expect to see stronger performance for the balance of the year. CNS revenue for Latin American region grew sequentially at 2.3% on a constant currency basis, driven by strong growth in the enterprise business of 2.9%. Also, voice services and other revenues was $200 million this quarter compared to $204 million in the first quarter. We continue to expect volatility in wholesale voice services revenue going forward as we manage our combined wholesale voice platform for margin growth. At the bottom of Slide 4, for the second quarter of 2012 we experienced a slight uptick in CNS revenue churn from 1.3% to approximately 1.6% in the second quarter. The increase in disconnects is primarily attributable to a couple of legacy large Global Crossing customers, the majority of which are the U.K. government customers I mentioned earlier. Read the rest of this transcript for free on seekingalpha.com