Global Crossing Maintains the Pace

October 28th, 2009 by · 1 Comment

International IP services provider glbc reported Q3 earnings after the bell.  They continued the growth they started in the prior quarter, falling roughly within my own expectations, and held costs in line.   A fireworks show it was not, but after the results of Verizon, AT&T, and Level 3, it has been clear that while the carrier market may be recovering from the recession it isn't exactly roaring back just yet.  Here is a quick summary of Global Crossing's performance so far this year, followed by my own thoughts and what I gleaned from a quick chat with company management:

Q1/09 Q2/09 Q3/09

Remaining

Q4 Guidance

GCUK 107 113 117
GC Impsat 111 119 125
ROW 292 307 311
Total Invest & Grow 510 539 553
Wholesale Voice 98 94 89
Total Revenue 609 633 643 615-715
Cost of Revenue 430 432 443
SG&A 104 108 109
OIBDA 75 93 91 61-121
Earnings per share -0.99 0.43 -1.23
Free Cash Flow -32 -10 +52 40-90
Capital Expenditures 38 54 33

While sequential growth continued, much of it came from currency fluctuations.  The strongest link on a constant currency basis was GC Impsat's results, reflecting continued strength in both traffic growth and pricing in Latin America.  The weakest link was GCUK, which was attributed to lower than usual non-recurring revenues such as professional services.   Wholesale voice continued to slide, but with the low margins brought in by that segment the effect on EBITDA was minimal. EBITDA of $91M seemed in-line, and the company maintained all full year guidance - which continues to look easy to meet.

I was fortunate to have a few minutes with CFO John Kritzmacher and CFO-North America Gary Breauninger, from which I gleaned the following tidbits:

  • Consolidation - the overall financial environment supporting further consolidation in the sector continued to improve during the quarter, and M&A chatter has increased even though there hasn't been much actual activity.
  • September's refinancing - In addition to improving their balance sheet, this move did give the company greater flexibility for M&A.  The term loan they paid off had more restrictive change of control provisions that would have limited the range of potential transactions they could have engaged in.  In other words, they could theoretically use more stock in a deal without having to refinance debt.
  • CDN - It has been three quarters since they began reselling the CDN services of Edgecast and Limelight.  Things have gone well, but the company isn't committing to any further action until perhaps next year.
  • Pricing - the dynamics remain consistent with what we have seen so far this year.  No price wars have broken out of late.
  • Capex - This was lower in Q3 largely due to larger subsea projects in the first half that they didn't have.

Overall, there were few surprises here.  But then businesses like few surprises, it's we bloggers that prefer to live in exciting times.

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Categories: Financials · Internet Backbones

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