Level 3 (LVLT +9.6%) has hiked its 2014 adjusted EBITDA guidance to 14%-18% growth from a prior 11%-14%. Free cash flow guidance has been hiked by $25M to $250M-$300M.
Adjusted EBITDA rose 23% Y/Y in Q1 to $458M, and adjusted EBITDA margin by 480 bps to 28.5%. Unlevered cash flow grew to $106M from $28M, and free cash flow improved to -$22M from -$162M.
A 40 bps Q/Q and 170 bps Y/Y increase in gross margin contributed to the EBITDA growth. As did a 7% Y/Y drop in SG&A spend to $537M.
Core network service (CNS) revenue (over 90% of total revenue) grew 6.6% Y/Y in Q1, an improvement from Q4's 4.1% clip. Wholesale/other revenue fell 26% due to voice weakness.
CNS growth was fueled by a 10% Y/Y increase in IP and data services revenue to $573M, and a 5.5% increase in transport/fiber revenue to $502M. The divison's voice revenue grew only 0.4% to $237M, and its colocation/data center revenue 2.1% to $145M.
Level 3 ended Q1 with $7.8B in net debt, roughly even with Q4. Shares have made new 52-week highs.
Q1 results, PR