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Q1 2011 Earnings Call
May 05, 2011 11:30 am ET
Tony Davis - Vice President of Investor Relations
Glen Post - Chief Executive Officer, President and Director
R. Ewing - Chief Financial Officer and Executive Vice President
Karen Puckett - Chief Operating Officer and Executive Vice President
Michael McCormack - Nomura Securities Co. Ltd.
Kevin Smithen - Macquarie Research
Batya Levi - UBS Investment Bank
Simon Flannery - Morgan Stanley
Unknown Analyst -
Previous Statements by CTL
» CenturyLink's CEO Discusses Q4 2010 Results - Earnings Call Transcript
» CenturyLink CEO Discusses Q3 2010 Results - Earnings Call Transcript
» CenturyLink Q2 2010 Earnings Call Transcript
Thank you, Saeed. Good morning, everyone, and welcome to our call today to discuss CenturyLink's first quarter 2011 results released earlier this morning.
Unless otherwise noted in the press release, our NI [ph] remarks and related materials this morning, the first quarter results discussed in the press release and during this call relates solely to legacy CenturyLink, Inc.. Therefore, unless otherwise noted, they do not include results of operations request. The slide presentation we will be reviewing during the prepared remarks portion of today's call is available on CenturyLink's IR website at ir.centurylink.com or the Investor Relations section of our corporate website at www.centurylink.com. At the conclusion of our prepared remarks today, we will open the call for question and answer.
On Slide 2. You'll see our Safe Harbor language. It's there for your information. We will be making certain forward-looking statements today, particularly as they pertain to guidance for 2011, the integration of Embarq and Qwest, the pending acquisition of Savvis and other outlooks in our business. Now, moving to Slide 3, we ask that you also note, that our earnings release issued earlier this morning and the slide presentation of remarks made during this call contains certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and GAAP financial measures are available on our earnings release and on our website at www.centurylink.com. This slide also contains additional disclosure information related to the recent CenturyLink and Savvis merger agreement announcement. We ask that you review Safe Harbor language and these additional disclosures found here, as well as in our press release and in our SEC filings, which describe factors that could cause our actual results to differ materially from those projected by us in those forward-looking statements.
Turning to Slide 4, your host today is Glenn Post, Chief Executive Officer and president of CenturyLink. Joining Glenn on our call today is Stewart Ewing, CenturyLink's Chief Financial Officer. Also available during the question and answer period of today's call is Karen Puckett, CenturyLink's Chief Operating Officer.
Our call today will be accessible for telephone replay through May 11, 2011, and accessible for webcast replay through May 25, 2011. For anyone listening to taped or webcast replay of this call or for anyone reviewing a written transcript of today's call, please note that all information presented is current only as of May 5, 2011, and should be considered valid only as of this date, regardless of the date listened to or reviewed.
So as you turn to Slide 5, I will now turn the call over to your host today, Glen Post. Glen?
Thank you, Tony. We appreciate you joining us today as we discuss CenturyLink's first quarter 2011 operating results, as well as selected operational updates and 2011 guidance information. We achieved solid financial and operational performance for the first quarter of 2011, even as we worked toward an April 1 date for the closing of our acquisition of Qwest and the launch of the combined company. Operating revenues are at the top of our guidance and diluted earnings per share exceeded the top end of our guidance and we also achieved solid high-speed Internet subscriber growth during the first quarter and continue to see improvements in access line declines.
Now moving to Slide 6 in the deck, we achieved operating revenues of $1.7 billion for the quarter, at the top end of our guidance. Diluted earnings per share, excluding special items, was $0.76 per share, exceeding the top end of guidance by $0.06. Our cash flows remained strong. We generated free cash flow of $528 million during the quarter. There were several factors contributing our operating revenues, meeting the top end of our previous guidance for the quarter. First of all, we lost fewer access lines than we had forecast for the quarter. Second, access minutes of use declined at a slower rate than we had anticipated, and demand for our strategic product and services continues to show strong growth. And strategic revenues continue to increase as a percentage of total operating revenues. In first quarter 2011, strategic revenues accounted for 31% of total revenues, compared to 27% in the first quarter of 2010. The growth in strategic revenues as a percentage of total operating revenues is a positive trend that we are focused on continuing in the months ahead. Also, we continue to enhance our broadband product portfolio through deploying higher speeds in key markets, as well as adding incremental value through broadband features such as computer support and online backup services. In the first quarter, we maintained our overall go-to-market approach, but continued to refine our segmentation, our messaging, our bundled and tools for our sales channels to drive customer growth and average revenue per customer per unit. We also continue to enhance and expand our advanced data, our IP networks and value-added services for business and enterprise customers. Overall, monthly recurring revenues continue to look solid in enterprise, our sales for Strategic Products, which included the net [ph]and MPLS direct Internet access, were up 18% year-over-year and first quarter '11. Additionally, we saw an increase of 31% year-over-year sales -- ND [ph] sales new customers.