Competitive fiber operator XO Holdings (news, filings) reported its Q1/2010 earnings today after the market closed, which was as usual at the very last possible minute. Revenues fell sequentially to $369.5M for the quarter as legacy revenues leaked away faster than the company’s Broadband operations could grow. Adjusted EBITDA was $30.6M for 8.3% adjusted EBITDA margins, which is of course not a particularly inspiring number but par for the course for XO in the first quarter over the years. Here are their results in the context of the past 4 quarters in tabular form:
|$ in millions||Q1/09||Q2/09||Q3/09||Q4/09||Q1/10|
|Cost of Revenue||220.0||
Of particular interest though is the company’s cash position. At the end of the quarter they had just $311.2M, and they spent $217.4M of that on April 15 to retire their class A preferred stock. That leaves them with $93.7M pro forma now, minus what has been consumed since. Capital expenditures rose to $64.2M in the quarter, their highest in some time – I wonder what they’re doing with it.
Now for a company with $1.5B in revenues, $93.7M in cash on the balance sheet is an unstable situation. The company said once again that it intends to raise money but that it felt high yield debt would be detrimental due to the cost and the covenants. Assuming they stick to their guns on the high yield debt prohibition, that leaves two main options:
- dilution in some form – Whether in the form of sales of common, preferred, a rights offering, converts, etc
- a sale of the company – or part of it, or whatever
In either case, it is sure to directly involve majority owner Carl Icahn, and therefore is sure to wind up in court somewhere. I’d say something’s gotta give, but we’ve been at that stage for a while now.
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