Global Crossing Earnings Preview

On Tuesday morning we hear how the world has been treating another next-generation carrier – Global Crossing.  A combination of M&A rumors and management turnover have raised speculation ^[1] that the company will be sold soon, but the price it would bring remains unclear.  The company has substantially improved its operations throughout the past year and a half, meaning they are just weak rather then spectacularly horrible like they used to be.

Here is a quick preview on what to expect for Q2’s results:

On a geographic basis, one would expect revenue to fall in the neighborhood of GCUK $156M, GC Impsat $99M, and ROW $396M, less intersegment revenues of $6M.

Adjusted Gross Margins should be around 53.5%, up slightly due to improving revenue mix.  The remainder of their costs tend to be hard to model, they jump around quite a bit.  On the one hand this might show uncertainty in their operating model, but it may simply be that they provide more granularity on these expenses rather than lumping them into just a COGS and SG&A.  One should generally expect them to fall in the ranges:

In order to meet the lower bar of guidance, Global Crossing needs a quarterly EBITDA ramp of about 10M on average, e.g. a progression of 66,76,86,96 for $324M.  However, their guidance is not terribly aggressive, and we should look for them to track toward the midpoint, with a bias toward the end of the year.  Hence, a Q2 EBITDA number of around $80M +/- 5M is probably where should expect them to come in at.