Qwest Communications International Inc
Qwest Communications International — Q1 2010 Earnings Presentation
23 slides from Qwest Communications International's earnings presentation, May 5, 2010
Slide 1: Qwest Communications Investor Quarterly Update – 1Q10
Qwest Communications Investor Quarterly Update – 1Q10 May 5, 2010
Slide 2: Kurt Fawkes, Senior Vice President – Investor Relations
Kurt Fawkes Senior Vice President – Investor Relations
Slide 3: Forward Looking Statements Note
Forward Looking Statements Note Forward-Looking Statement Note This release may contain projections and other forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to the documents filed by u
Slide 4: EPS Summary
EPS Summary 4 1Q 2010 1Q 2009 Reported EPS (Diluted) $0.02 $0.12 2009 Adjustments: Severance / Restructure 0.01 Lower Tax Rate -0.01 2010 Adjustments: Medicare Part D 0.06 Early Retirement of Debt / Severance and Restructure 0.02 Reported with adjustments $0.10 $0.12 Incremental non-cash Pension / O
Slide 5: 1Q10 Reporting Changes
1Q10 Reporting Changes Additional transparency and reporting changes: • Revised definitions for cost of sales, selling expenses, and general, administrative and other operating expenses • Expanded segment expense categories to provide visibility on variable, fixed and acquisition costs • Additional
Slide 6: Ed Mueller, Chairman and Chief Executive Officer
Ed Mueller Chairman and Chief Executive Officer
Slide 7: Continued Performance, Solid Results
Continued Performance, Solid Results • Strong operating momentum • Ongoing delivery on key initiatives for long-term growth • CenturyLink-Qwest combination strengthens competitive offerings • Positioned to produce superior shareholder returns
Slide 8: Teresa Taylor, Executive Vice President – Chief Operating Officer
Teresa Taylor Executive Vice President – Chief Operating Officer
Slide 9: Improving Revenue Trends
Improving Revenue Trends 9 Revenue percentage change on a year over year basis 1Q10 4Q09 Seq. Consolidated revenue w/o wireless MVNO -4.9% -7.3% +240 bps Business markets revenue -0.2% -2.4% +220 bps Wholesale markets revenue -10.9% -13.8% +290 bps Mass markets revenue w/o wireless MVNO -6.9% -7.1%
Slide 10: Business Markets
Business Markets 10 In millions, except margins 1Q10 YoY Seq. Total segment revenue 999 - -1% Strategic services 417 8% 2% Legacy services 447 -9% -1% Data integration 135 9% -9% Total business markets expense 599 -3% -3% Business markets segment income 400 5% 2% Business markets margin percentage 4
Slide 11: Wholesale Markets
Wholesale Markets 11 In millions, except margins 1Q10 YoY Seq. Total segment revenue 685 -11% -1% Strategic services 316 1% 2% Legacy services 369 -19% -4% Total wholesale expense 226 -24% -11% Wholesale segment income 459 -2% 4% Wholesale markets margin percentage 67.0% +590 bps +370 bps Strategic
Slide 12: Mass Markets
Mass Markets 12 In millions, except margins 1Q10 YoY Seq. Total segment revenue 1,183 -11% -1% Strategic services 365 5% 3% Legacy services 818 -11% -3% Total segment revenue w/o wireless MVNO 1,183 -7% -1% Total mass markets expense 556 -13% - Mass markets segment income 627 -9% -3% Mass markets ma
Slide 13: Mass Markets Key Metrics
Mass Markets Key Metrics 13 Net additions in thousands, excluding ARPU 1Q09 2Q09 3Q09 4Q09 1Q10 Total Mass Markets access lines -249 -248 -252 -193 -192 Broadband subscribers 56 33 29 42 40 Video subscribers 25 18 43 40 11 Wireless subscribers 60 20 22 78 84 Total Mass Markets connections -108 -177
Slide 14: Joe Euteneuer, Executive Vice President – Chief Financial Officer
Joe Euteneuer Executive Vice President – Chief Financial Officer
Slide 15: Consolidated Results
Consolidated Results 15 In millions, except margin 1Q10 YoY Seq. Revenue 2,966 -7% -1% Strategic revenue 1,098 5% 2% Legacy revenue 1,634 -13% -3% Total strategic and legacy revenue 2,732 -6% -1% Data integration 135 9% -9% Total revenue less wireless MVNO 2,966 -5% -1% Expense Cost of sales 941 -7%
Slide 16: Balance Sheet
Balance Sheet 16 (1) Reconciliation of Non-GAAP measures can be found in the appendix to this presentation. In millions, except leverage ratio 1Q10 4Q09 1Q09 Total borrowings 13,546 14,200 13,342 Cash and short term investments 1,852 2,406 547 Net debt(1) 11,694 11,794 12,795 Leverage ratio(1) 2.7 2
Slide 17: Free Cash Flow
Free Cash Flow 17 In millions, except DPO and DSO 1Q10 1Q09 Days sales outstanding 37.8 38.6 Days payable outstanding 32.0 34.7 Capital expenditures 387 334 Adjusted free cash flow(1) 335 339 Dividends paid 138 137 (1) Reconciliation of Non-GAAP measures can be found in the appendix to this presenta
Slide 18: Disciplined Approach Improves ROIC
Disciplined Approach Improves ROIC 18 9% 10% 11% 12% 1Q08 1Q09 1Q10 Return on Invested Capital (1) • Reflects lower capital spending and improved asset mix • Committed to a disciplined capital investment strategy (1) Return on Invested Capital is calculated by subtracting the 12-month depreciation a
Slide 19: Guidance
Guidance 19 Full year 2010 expectations • Improving reported revenue comparisons over the course of 2010 with the year-over-year decline improving to a low to mid-single digit rate by the fourth quarter • Focused on maintaining, improving margins • Adjusted EBITDA of $4.3 to $4.4 billion • Capital i
Slide 20: Q&A
Q&A 20 • Ed Mueller, Chairman and CEO • Teresa Taylor, Executive Vice President and COO • Joe Euteneuer, Executive Vice President and CFO • Kurt Fawkes, Senior Vice President - Investor Relations
Slide 21: Non-GAAP Reconciliations – EBITDA
Non-GAAP Reconciliations RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—EBITDA (1) (UNAUDITED) (Dollars in millions) Three Months Ended 3/31/09 12/31/09 3/31/10 EBITDA—as adjusted $ 1,145 $ 1,085 $ 1,124 Less: Legal reserve — — — Less: Property tax settlement — — — Less: Realignment, severance and re
Slide 22: Non-GAAP Reconciliations – Net Debt
Non-GAAP Reconciliations RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—NET DEBT (1) (UNAUDITED) (Dollars in millions) 3/31/09 12/31/09 3/31/10 Net debt: Current portion of long-term borrowings $ 587 $ 2,196 $ 2,046 Long-term borrowings—net 12,755 12,004 11,500 Total borrowings—net 13,342 14,200 13,5
Slide 23: Non-GAAP Reconciliations – Free Cash Flow from Operations
Non-GAAP Reconciliations RECONCILIATION OF NON-GAAP FINANCIAL MEASURES—FREE CASH FLOW FROM OPERATIONS (1) (UNAUDITED) (Dollars in millions) Three Months Ended 3/31/09 3/31/10 Free cash flow from operations: Cash provided by operating activities $ 657 $ 722 Less: Expenditures for property, plant and
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