Edit Symbol List
Enter up to 25 symbols separated by commas or spaces in the text box below. These symbols will be available during your session for use on applicable pages.
Don't know the stock symbol? Use the symbol lookup tool.
Alphabetize the sort order of my symbols
Level 3 Communications (LVLT)
Q2 2013 Earnings Call
July 31, 2013 10:00 am ET
Sunit S. Patel - Chief Financial Officer and Executive Vice President
Jeffrey K. Storey - Chief Executive Officer, President and Director
Simon Flannery - Morgan Stanley, Research Division
Scott Goldman - Goldman Sachs Group Inc., Research Division
Ana Goshko - BofA Merrill Lynch, Research Division
Colby Synesael - Cowen and Company, LLC, Research Division
Donna Jaegers - D.A. Davidson & Co., Research Division
Michael Rollins - Citigroup Inc, Research Division
Brett Feldman - Deutsche Bank AG, Research Division
Thomas O. Seitz - Jefferies LLC, Research Division
Michael J. Funk - BofA Merrill Lynch, Research Division
Previous Statements by LVLT
» Level 3 Communications Management Discusses Q1 2013 Results - Earnings Call Transcript
» Level 3 Communications' CEO Presents at Morgan Stanley Technology, Media & Telecom Conference (Transcript)
» Level 3 Communications Management Discusses Q4 2012 Results - Earnings Call Transcript
Thank you, Fran. Good morning, everyone, and thank you for joining us for the Level 3 Communications Second Quarter 2013 Earnings Call. With us on the call today are Jeff Storey, President and Chief Executive Officer; and Sunit Patel, Executive Vice President and Chief Financial Officer. To accompany today's call, you can find the presentation slides, press release and supplemental schedules in the Investor Relations section of the Level 3 website at www.level3.com.
During our discussion of the revenue results today, we will be comparing this quarter's results to prior periods. Unless otherwise noted, all revenue comparisons to prior periods are provided on a constant currency basis.
I need to cover our Safe Harbor statement, which can be found on Page 2 of our 2Q '13 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 and presentation, which are posted on our website.
I'll now turn the call over to Sunit.
Sunit S. Patel
Thank you, Valerie, and good morning, everyone. I'd like to start with some of the highlights for the quarter, which can be found on Slide 3 of our presentation. Enterprise Core Network Services revenue grew 7.1% year-over-year excluding U.K. government revenue, while CNS sales orders saw strong growth both year-over-year and quarter-over-quarter.
Adjusted EBITDA grew 12% year-over-year, excluding severance and restructuring charges in both second quarter 2013 and second quarter 2012. And given the growth in CNS sales orders in the first half of the year and the decrease in churn expected in the second half of the year, we expect stronger sequential CNS revenue performance for the remainder of the year.
Turning to revenue on Slide 4, Core Network Services revenue grew to $1.379 billion or 2.4% year-over-year in the second quarter of 2013. Sequentially, CNS revenue increased 0.9%, an improvement over the 0.7% increase in the second quarter of 2012. Excluding U.K. government revenue, CNS revenue grew 3.1% year-over-year and 1.2% sequentially. Enterprise CNS revenue grew 5.8% year-over-year and 1.9% sequentially. Excluding U.K. government revenue, enterprise revenue grew 2.4% sequentially.
Wholesale CNS revenue declined 0.8% sequentially, an improvement from the 3.8% decrease we saw in the first quarter of 2013. During the quarter, we did see the full effect of the carrier customer disconnect we mentioned last quarter.
On a regional basis, North America CNS revenue grew 1.4% year-over-year and 0.3% sequentially. Enterprise CNS revenue growth was 5.1% year-over-year and 1.3% sequentially. We expect enterprise growth to strengthen for the remainder of the year in North America.
In EMEA, CNS revenue declined 1.8% year-over-year and 0.1% sequentially. Excluding U.K. government revenue, EMEA CNS revenue grew 2.1% year-over-year and 1.8% sequentially, driven by continued strong enterprise performance. Despite macroeconomic conditions, EMEA enterprise CNS revenue grew 9.4% year-over-year and 3% sequentially.
Latin America CNS revenue growth strengthened, increasing 13.5% year-over-year and 5.6% sequentially. Enterprise revenue growth was 14.4% year-over-year and 6.4% sequentially.
Overall, demand for our service is high, and the region saw growth from our enterprise and wholesale channels, driven primarily by customers who purchased multiple services from both within the region as well as globally. The strongest demand is coming from financial services, e-commerce and energy customers.
Wholesale Voice Services and other revenue declined to $186 million in the second quarter of 2013 compared to $229 million in the second quarter of 2012. In the second quarter, we continued to see the volume of Wholesale Voice Services decline as we saw some traffic leave our network. Wholesale Voice Services revenue remains volatile and has been declining for the last years. However, we continue to manage Wholesale Voice for margin contribution.
At the bottom of Slide 4, for the second quarter of 2013, we saw our CNS revenue churn decrease to 1.5% from 1.6% in the first quarter. Excluding the U.K. government contracts, churn would have been 1.4% this quarter and was driven primarily from an increase in Latin America disconnects. Overall, we believe our churn levels will improve in the second half of the year.