Global Crossing Q1/10 Earnings Preview

On Thursday morning, Global Crossing will host its earnings conference call, which means that they will likely release their results today after the market closes.  As the first of the nextgen carriers to report and as one of the larger competitive telecoms that is frequently covered here on Telecom Ramblings, it is time to offer is a quick tabular preview of what to expect in the context of 2009 and guidance.

$ in millions	Q1/09	Q2/09	Q3/09	Q4/09	Q1/10 (my guess)	FY2010 (guidance)
GCUK	107	113	117	123	124
GC Impsat	111	119	125	128	129
ROW	292	307	311	306	310
Total Invest & Grow	510	539	553	557	563	2300-2375
Wholesale Voice	98	94	89	93	90
Total Revenue	609	633	643	651	653
Cost of Revenue	430	432	443	461	455
SG&A	104	108	109	107	110
OIBDA	75	93	91	83	95 to 100	390-440
Free Cash Flow	-32	-10	+52	+72	-50 to 0	10 to 60
Capital Expenditures	38	54	33	49	40 to 50

Revenue: Q1 tends to be seasonally week and while the economy has improved I don’t see anyone suggesting it is roaring back.  Therefore I do not expect much more from Global Crossing in the way of revenue growth than we saw in Q4, and in fact the estimates on Yahoo Finance suggest revenues will be flat.   The full year revenue guidance of $2300-2375M will likely depend largely on growth in the second half.

OIBDA: Cost of Revenue surged in Q4 and brought down adjusted OIBDA margins, which needs to improve more than any other metric for this company.   I’m looking for a return to 14% or better in the short term.   Full year guidance of $390-440M implies the quarterly OIBDA number should approach $100M soon, though perhaps not reaching it just yet.

Free Cash Flow: For this company and its peers, working capital tends to flow out in the first half and back in in the second, and therefore I expect negative cash flow this quarter, but with full year guidance intact.

A year ago Global Crossing’s stock was trading in the mid 7’s, and it has more than doubled since and touched $17 recently.  While they weathered the recession reasonably well, I strongly suspect that M&A speculation is behind part of their strong stock performance lately.  With the credit markets now accessible, such a move would seem as likely in the next quarter or two as it has ever been.  At the CC they will almost certainly be asked, especially in light of the recent CenturyTel/Qwest deal which removed one potential partner from the picture.

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Categories: Financials · Internet Backbones