1 q14 earnings presentation

Issued on April 30, 2014 © 2014 Level 3 Communications, LLC. All Rights Reserved

April 30, 2014

First Quarter 2014 Results

Issued on April 30, 2014

Cautionary Statement & Pro Forma Adjustment

2

Some statements made in this presentation are forward-looking in nature and are based on management's

current expectations or beliefs. These forward-looking statements are not a guarantee of performance and are

subject to a number of uncertainties and other factors, many of which are outside Level 3's control, which

could cause actual events to differ materially from those expressed or implied by the statements. Important

factors that could prevent Level 3 from achieving its stated goals include, but are not limited to, the company's

ability to: successfully integrate the Global Crossing acquisition or otherwise realize the anticipated benefits

thereof; manage risks associated with continued uncertainty in the global economy; maintain and increase

traffic on its network; develop and maintain effective business support systems; manage system and network

failures or disruptions; avert the breach of its network and computer system security measures; develop new

services that meet customer demands and generate acceptable margins; defend intellectual property and

proprietary rights; manage the future expansion or adaptation of its network to remain competitive; manage

continued or accelerated decreases in market pricing for communications services; obtain capacity for its

network from other providers and interconnect its network with other networks on favorable terms; attract and

retain qualified management and other personnel; successfully integrate future acquisitions; effectively

manage political, legal, regulatory, foreign currency and other risks it is exposed to due to its substantial

international operations; mitigate its exposure to contingent liabilities; and meet all of the terms and conditions

of its debt obligations. Additional information concerning these and other important factors can be found within

Level 3's filings with the Securities and Exchange Commission. Statements in this presentation should be

evaluated in light of these important factors. Level 3 is under no obligation to, and expressly disclaims any

such obligation to, update or alter its forward-looking statements, whether as a result of new information,

future events, or otherwise.

In 2013, the company accrued 60 percent of its annual employee bonus compensation expense in the form of

equity and 40 percent in cash, compared to 100 percent cash in 2014. The amount of the bonus accrued as

equity based compensation in the first quarter of 2013 was $15 million. SG&A, Adjusted EBITDA and Adjusted

EBITDA margin for the first quarter of 2013 have been adjusted on a pro forma basis to include the $15 million

to present the results on a consistent basis with the accrual of bonus compensation expense in 2014 as 100

percent cash.

Issued on April 30, 2014

First Quarter 2014 Highlights

3

Nine consecutive quarters of Enterprise Core Network Services

(CNS) revenue growth on a constant currency basis

CNS revenue grew 6.6% YoY

Gross margin increased to 61.8% in 1Q14

Strong Adjusted EBITDA of $458 million

Based on strong first quarter performance and momentum we

are seeing, raising full year guidance:

Adjusted EBITDA is expected to grow 14-18%

• Prior outlook of 11-14%

Free Cash Flow is expected to be in the range of $250 to $300 million

• Prior outlook of $225 to $275 million

Issued on April 30, 2014

$871 $884

$905

$939 $962

1Q13 2Q13 3Q13 4Q13 1Q14 4

CNS By Region CNS By Customer Type

CNS revenue grew to $1.457

billion or 6.6% YoY on a constant

currency basis

Enterprise CNS grew 11% YoY on

a constant currency basis:

14% YoY from North America

13% YoY from Latin America

10% YoY from EMEA(1)

CNS revenue churn(2) was 1.5%

compared to 1.6% in the first

quarter 2013

Core Network Services

Revenue

72%

15%

13%

North America EMEA Latin America

66%

34%

Enterprise Wholesale

(1) Excludes EMEA UK Government CNS revenue

(2) Level 3 measures revenue churn as disconnects of Core Network Services

monthly recurring revenue as a percent of Core Network Services revenue. This

calculation excludes usage. Also included in the churn calculations are customers

who are disconnecting existing service, but are replacing their old service with

new, generally higher speed services

Total Enterprise CNS Revenue ($ in millions)

Issued on April 30, 2014

$577

$537

36.6%

33.4%

1Q13 1Q14

SG&A SG&A % total revenue

Level 3 Gross Margin and SG&A

5

Gross Margin improvement

driven by high margin CNS revenue growth

SG&A improved as a result of

headcount reductions and non-

headcount savings

Gross Margin($ in millions)

SG&A(1)

($ in millions)

$948

$995

60.1%

61.8%

1Q13 1Q14

GM $ GM %

(1) SG&A excludes non-cash compensation expense

(2) First quarter 2013 SG&A expense is adjusted to include the $15 million in bonus-related non-cash compensation

(2)

Issued on April 30, 2014

Level 3 Adjusted EBITDA and Capital Expenditures

6

Continued YoY double digit growth

Capital expenditures are

expected to represent 12-13% of

revenue for 2014

Adjusted EBITDA(1)

($ in millions)

Capital Expenditures($ in millions)

(1) First quarter 2013 Adjusted EBITDA and the resulting Adjusted EBITDA margin are adjusted by $15 million

$371

$458

23.5%

28.5%

1Q13 1Q14

Adj EBITDA Adj EBITDA % of Total Revenue

$169 $163

1Q13 1Q14

Issued on April 30, 2014

Level 3 Free Cash Flow

7

Free Cash Flow improved by

$140 million YoY, driven by

EBITDA improvements and cash

interest expense savings

Free Cash Flow – Year over Year($ in millions)

Free Cash Flow – Rolling Four Quarters ($ in millions)

Strong improvement of $207

million in Free Cash Flow on a

rolling four quarter basis

($162)

($22)

1Q13 1Q14

($114)

$93

1Q13 1Q14

Issued on April 30, 2014

Debt Maturity Profile

8

Net Debt to Adjusted EBITDA ratio was 4.6x, compared to 5.3x in the first

quarter 2013

Focused on the lower end of target leverage range of 3 to 5 times

Average interest rate was 6.8%, compared to 7.4% in the first quarter 2013

2015 maturity is 7% Convertible Senior Notes that convert at $27

Cash on hand as of March 31, 2014 of $607 million

Note: Maturity chart excludes capital leases and other debt of approximately $82 million

March 31, 2014

($ in Millions)

$475 $300

$3,420 $3,471

$640

2014 2015 2016 2017 2018 2019 2020 2021

Issued on April 30, 2014

Full Year 2014 Business Outlook

9

Updated

Expect Adjusted EBITDA growth of 14-18% for the full year 2014 compared

to the full year 2013 (from a starting point of $1.565 billion)

Expect Free Cash Flow of $250 to $300 million for the full year 2014

Unchanged

For the full year 2014, expect CNS revenue growth to be higher than the

2.9% growth we saw for the full year 2013

Expect GAAP interest expense of approximately $600 million

Expect net cash interest expense of approximately $560 million

Expect capital expenditures of approximately 12-13% of total revenue

Expect depreciation and amortization of approximately $750 million for the

full year 2014

Expect GAAP income tax expense of approximately $70 million

Issued on April 30, 201410

Appendix

Issued on April 30, 2014

Revenue by Region

11

($ in millions)

1Q13 4Q13 1Q14

1Q14/

1Q13

%Change

Constant

Currency

1Q14/

4Q13

%Change

Constant

Currency

1Q14

% CNS

CNS Revenue ($ in millions)

North America 967$ 1,025$ 1,043$ 7.8 % 1.7 % 72 %

Wholesale 372$ 374$ 368$ (1.4)% (1.6)% 25 %

Enterprise 595$ 651$ 675$ 13.5 % 3.6 % 47 %

EMEA 223$ 223$ 225$ (2.8)% (0.4)% 15 %

Wholesale 89$ 89$ 87$ (5.7)% (3.8)% 6 %

Enterprise 134$ 134$ 138$ (0.8)% 1.8 % 9 %

Latin America 182$ 195$ 189$ 11.9 % (0.9)% 13 %

Wholesale 40$ 41$ 40$ 7.8 % 0.1 % 3 %

Enterprise 142$ 154$ 149$ 13.0 % (1.1)% 10 %

Total 1,372$ 1,443$ 1,457$ 6.6 % 1.0 % 100 %

Wholesale 501$ 504$ 495$ (1.4)% (1.8)% 34 %

Enterprise 871$ 939$ 962$ 11.2 % 2.6 % 66 %

Total CNS 1,372$ 1,443$ 1,457$ 6.6 % 1.0 %

Wholesale Voice Services and

Other Revenue 205 159 152 (25.6)% (4.5)%

Total Revenue 1,577$ 1,602$ 1,609$ 2.4 % 0.5 %

Level 3 Communications

Issued on April 30, 2014

Services Revenue

12

1Q14 Percent of CNS

Revenue by Service

Type

10%

16%

35%

39%

Colocation and DataCenter Services

Voice Services(Local and Enterprise)

Transport & Fiber

IP and Data Services

Level 3 Communications($ in millions)

Core Network Services Revenue 1Q13 4Q13 1Q14

1Q14/

1Q13

%Change

1Q14/

4Q13

%Change

1Q14

% CNS

Colocation and Datacenter Services 142$ 154$ 145$ 2.1 % (5.8)% 10 %

Transport and Fiber 476$ 496$ 502$ 5.5 % 1.2 % 35 %

IP and Data Services 518$ 557$ 573$ 10.6 % 2.9 % 39 %

Voice Services (Local and

Enterprise) 236$ 236$ 237$ 0.4 % 0.4 % 16 %

Total Core Network Services 1,372$ 1,443$ 1,457$ 6.2 % 1.0 % 100 %

Wholesale Voice Services and

Other 205$ 159$ 152$ (25.9)% (4.4)%

Total Revenue 1,577$ 1,602$ 1,609$ 2.0 % 0.4 %

Issued on April 30, 201413

Non-GAAP Reconciliation

Issued on April 30, 201414

Pursuant to Regulation G, the company is hereby providing definitions of non-GAAP financial metrics

and reconciliations to the most directly comparable GAAP measures.

The following describes and reconciles those financial measures as reported under accounting

principles generally accepted in the United States (GAAP) with those financial measures as adjusted

by the items detailed below and presented in the accompanying news release. These calculations are

not prepared in accordance with GAAP and should not be viewed as alternatives to GAAP. In keeping

with its historical financial reporting practices, the company believes that the supplemental presentation

of these calculations provides meaningful non-GAAP financial measures to help investors understand

and compare business trends among different reporting periods on a consistent basis.

In addition, measures referred to in the accompanying news release as being calculated “on a constant

currency basis” or "in constant currency terms" are non-GAAP metrics intended to present the relevant

information assuming a constant exchange rate between the two periods being compared. Such

metrics are calculated by applying the currency exchange rates used in the preparation of the prior

period financial results to the subsequent period results.

Schedule To Reconcile To Non-GAAP Financial Metrics

Issued on April 30, 201415

Schedule To Reconcile To Non-GAAP Financial Metrics

Consolidated Revenue is defined as total revenue from the Consolidated Statements of

Operations.

Core Network Services Revenue includes revenue from colocation and datacenter services,

transport and fiber, IP and data services, and voice services (local and enterprise.)

Gross Margin ($) is defined as total revenue less cost of revenue from the Consolidated

Statements of Operations.

Gross Margin (%) is defined as gross margin ($) divided by total revenue. Management

believes that gross margin is a relevant metric to provide to investors, as it is a metric that

management uses to measure the margin available to the company after it pays third party

network services costs; in essence, a measure of the efficiency of the company’s network.

Adjusted EBITDA is defined as net income (loss) from the Consolidated Statements of

Operations before income taxes, total other income (expense), non-cash impairment charges,

depreciation and amortization and non-cash stock compensation expense.

Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by total revenue.

Issued on April 30, 201416

Schedule To Reconcile To Non-GAAP Financial Metrics

Management believes that Adjusted EBITDA and Adjusted EBITDA Margin are relevant and useful

metrics to provide to investors, as they are an important part of the company’s internal reporting and are

key measures used by Management to evaluate profitability and operating performance of the company

and to make resource allocation decisions. Management believes such measures are especially

important in a capital-intensive industry such as telecommunications. Management also uses Adjusted

EBITDA and Adjusted EBITDA Margin to compare the company’s performance to that of its competitors

and to eliminate certain non-cash and non-operating items in order to consistently measure from period to

period its ability to fund capital expenditures, fund growth, service debt and determine bonuses. Adjusted

EBITDA excludes non-cash impairment charges and non-cash stock compensation expense because of

the non-cash nature of these items. Adjusted EBITDA also excludes interest income, interest expense

and income taxes because these items are associated with the company’s capitalization and tax

structures. Adjusted EBITDA also excludes depreciation and amortization expense because these non-

cash expenses primarily reflect the impact of historical capital investments, as opposed to the cash

impacts of capital expenditures made in recent periods, which may be evaluated through cash flow

measures. Adjusted EBITDA excludes the gain (or loss) on extinguishment and modification of debt and

other, net because these items are not related to the primary operations of the company.

There are limitations to using Adjusted EBITDA as a financial measure, including the difficulty associated

with comparing companies that use similar performance measures whose calculations may differ from the

company’s calculations. Additionally, this financial measure does not include certain significant items

such as interest income, interest expense, income taxes, depreciation and amortization, non-cash

impairment charges, non-cash stock compensation expense, the gain (or loss) on extinguishment and

modification of debt and net other income (expense). Adjusted EBITDA and Adjusted EBITDA Margin

should not be considered a substitute for other measures of financial performance reported in accordance

with GAAP.

Issued on April 30, 201417

Schedule To Reconcile To Non-GAAP Financial Metrics

Debt is defined as total gross debt including capital leases from the Consolidated

Balance Sheet.

Net Debt to Last Twelve Months (LTM) Adjusted EBITDA Ratio is defined as debt,

reduced by cash and cash equivalents and divided by LTM Adjusted EBITDA.

Issued on April 30, 201418

Schedule To Reconcile To Non-GAAP Financial Metrics

Unlevered Cash Flow is defined as net cash provided by (used in) operating activities

less capital expenditures, plus cash interest paid and less interest income all as disclosed

in the Consolidated Statements of Cash Flows or the Consolidated Statements of

Operations. Management believes that Unlevered Cash Flow is a relevant metric to

provide to investors, as it is an indicator of the operational strength and performance of the

company and, measured over time, provides management and investors with a sense of

the underlying business’ growth pattern and ability to generate cash. Unlevered Cash Flow

excludes cash used for acquisitions and debt service and the impact of exchange rate

changes on cash and cash equivalents balances.

There are material limitations to using Unlevered Cash Flow to measure the company’s

cash performance as it excludes certain material items such as payments on and

repurchases of long-term debt, interest income, cash interest expense and cash used to

fund acquisitions. Comparisons of Level 3’s Unlevered Cash Flow to that of some of its

competitors may be of limited usefulness since Level 3 does not currently pay a significant

amount of income taxes due to net operating losses, and therefore, generates higher cash

flow than a comparable business that does pay income taxes. Additionally, this financial

measure is subject to variability quarter over quarter as a result of the timing of payments

related to accounts receivable and accounts payable and capital expenditures. Unlevered

Cash Flow should not be used as a substitute for net change in cash and cash equivalents

in the Consolidated Statements of Cash Flows.

Issued on April 30, 201419

Schedule To Reconcile To Non-GAAP Financial Metrics

Free Cash Flow is defined as net cash provided by (used in) operating activities less

capital expenditures as disclosed in the Consolidated Statements of Cash Flows .

Management believes that Free Cash Flow is a relevant metric to provide to investors,

as it is an indicator of the company’s ability to generate cash to service its debt. Free

Cash Flow excludes cash used for acquisitions, principal repayments and the impact of

exchange rate changes on cash and cash equivalents balances.

There are material limitations to using Free Cash Flow to measure the company’s

performance as it excludes certain material items such as principal payments on and

repurchases of long-term debt and cash used to fund acquisitions. Comparisons of

Level 3’s Free Cash Flow to that of some of its competitors may be of limited usefulness

since Level 3 does not currently pay a significant amount of income taxes due to net

operating losses, and therefore, generates higher cash flow than a comparable

business that does pay income taxes. Additionally, this financial measure is subject to

variability quarter over quarter as a result of the timing of payments related to interest

expense, accounts receivable and accounts payable and capital expenditures. Free

Cash Flow should not be used as a substitute for net change in cash and cash

equivalents on the Consolidated Statements of Cash Flows.

Issued on April 30, 201420

Schedule To Reconcile To Non-GAAP Financial Metrics

(1)- Adjusted EBITDA and the resulting Adjusted EBITDA margin in the first quarter excludes $15 million in non-cash bonus related compensation.

($ in millions) Q1 2013(1) Q1 2014

Consolidated Net Income (Loss) (78)$ 112$

Income Tax Expense (Benefit) 14 7

Total Other Expense 219 145

Depreciation and Amortization

Expense 194 184

Non-cash Compensation Expense 37 10

Non-cash Impairment — —

Consolidated Adjusted EBITDA 386$ 458$

Consolidated Revenue 1,577$ 1,609$

Adjusted EBITDA Margin 24.5 % 28.5 %

Level 3 Communications, Inc. and Consolidated Adjusted EBITDA

Issued on April 30, 201421

Schedule To Reconcile To Non-GAAP Financial Metrics

2014

($ in millions) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2013 Q1 2014

Net Cash Provided by Operating

Activities 183$ 70$ 400$ 7$ 216$ 104$ 386$ 141$ 660$ 847$

Capital Expenditures (180) (227) (198) (169) (208) (194) (189) (163) (774) (754)

Free Cash Flow 3$ (157)$ 202$ (162)$ 8$ (90)$ 197$ (22)$ (114)$ 93$

Cash Interest Paid 110 234 123 190 145 178 161 128 657 612

Interest Income (1) — — — — — — — (1) —

Unlevered Cash Flow 112$ 77$ 325$ 28$ 153$ 88$ 358$ 106$ 542$ 705$

Level 3 Communications, Inc. and Consolidated SubsidiariesCash Flows

2012 2013

Rolling Four

Quarter Basis

Issued on April 30, 201422

Schedule To Reconcile To Non-GAAP Financial Metrics

($ in millions)

Debt 8,388$

Cash and Cash Equivalents (607)

Net Debt 7,781$

LTM Adjusted EBITDA 1,696$

Net Debt to LTM Adjusted EBITDA Ratio 4.6

Net Debt to LTM Adjusted EBITDA ratio as of March 31, 2014

Level 3 Communications, Inc. and Consolidated Subsidiaries