Global Crossing Maintains the Pace

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

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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