International network operator glbc will hold its earnings CC on Tuesday morning, which means that if past behavior holds they will release their earnings PR on Monday after the market closes. Hence it is time once again for a preview, the idea being to help frame our expectations in context beforehand. The biggest feature for Global Crossing is its 2010 guidance, which suggests a hefty ramp through the remainder of the year for the company's core revenues and OIBDA. Analysts, however, expect total Q2 revenues in the neighborhood of $653M, up less than 1% from the prior quarter.
It's important to realize that the company's guidance excluded foreign exchange fluctuations, which unfavorably affected revenues in Q1 by $8M. I don't normally attempt to judge foreign exchange impacts, however a cursory glance at the pound and euro against the dollar during the quarter seems to suggest that there will be an effect of similar or perhaps larger magnitude in Q2. If that happens, I suspect the company's raw revenue numbers to be rather hard measure next to the Invest & Grow guidance range of $2300-2375 for the full year, because the baseline they started with has shifted quite a bit since - perhaps they will update guidance on the basis of current exchange rates. But they still ought to find a bit of growth, perhaps somewhat more than the street is expecting. Here is a tabular summary of my projections in the context of the prior four quarters:
|$ in millions||Q2/09||Q3/09||Q4/09||
|Total Invest & Grow||539||553||557||554||566||2300-2375|
|Cost of Revenue||432||443||461||455||455|
|Free Cash Flow||-10||+52||+72||-72||-25 to 0||10 to 60|
Unlike in past quarters, I am trying to include currency fluctuations when making my own projections. Any growth in GCUK will, I suspect, be offset by such headwinds, and the weaker economy overall across the pond will be felt. However Impsat should have a better time of it, as should the US-dominated 'rest of world' section. Regardless of currency fluctuations, however, it is clear that Global Crossing's guidance implies a substantial OIBDA ramp as the year goes on, finally cracking the $100M/quarter barrier. One way or another, that ramp should begin to show in this quarter's numbers.
Cash flows were strongly negative in the first quarter, largely based on seasonal costs that we see each year. If past trends hold then we should see a number closer to break-even for the second quarter followed by positive contributions in the second half. Likewise, I don't expect any major shift in capex.
On the M&A front, it seems to me lately that the chance of an imminent deal has receded somewhat. I still think the company is willing and able to be a part of consolidation in the sector, however the rumors I have been hearing have become less detailed and don't appear to suggest recent movement.
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