As anticipated, international network operator glbc reported Q1 earnings today after the market closed, with seasonality slowing them down a bit. Guidance for the full year was reiterated, which necessarily implies a substantial ramp in performance over the balance of the year.
Revenue: Total revenues of $648M were a bit lower than my own projections of $653, but that was mainly due to a $6M negative foreign exchange hit (which I don't try to model) which brought down GCUK and GC Impsat numbers a bit. Wholesale voice revenues ticked up slightly from the fourth quarter to $94M, while 'Invest & Grow' revenues fell slightly to $554M sequentially. The company pointed to continued strength in order volumes through the quarter as the source of their full year invest & grow revenue projections of $2300-2375M, suggesting an average of $582-607M over the next three quarters.
OIBDA: First quarter OIBDA checked in at $77M, of which $30M came from GCUK, $40M from GC Impsat, and just $7M from the Rest-of-World (ROW). It was that last number which held back OIBDA margins to just under 12%, with higher seasonal and benefit costs plus some unusually high repair activity due to a fiber cut on the South American Crossing cable. By reiterating guidance of $390-440M, the company is suggesting average OIBDA levels of $104-121M in the next three quarters - a substantial ramp. They also continue to expect adjusted OIBDA margins to improve over last year.
Cash flows: Free cash flow was -$72M, exhibiting the usual seasonal working capital swing plus the lower IRU sales they previously forecast. But the refinancing in the fall also changed the timing of cash interest payments, shifting more of it into the first quarter. Capex levels checked in at $57M, which seems like a healthy number given the revenue ramp implied by guidance.
All in all, the first quarter was nothing to write home about but of course it was much more fun than it was last year - which is a refrain I expect to hear from others this quarter. Global Crossing has a significant ramp to climb to meet its full year guidance, but feels it is on track to do so. The company's position on industry consolidation remains unchanged, and I continue to think there is a high likelihood they will be involved in something of that sort this year.
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