Global Crossing Dials Back Revenue, Cash Flow Guidance

November 1st, 2010 by · 7 Comments

International network operator glbc announced their Q3 earnings results after the bell, but the results didn’t match up to earlier projections of a big second half.   The company therefore reduced its guidance for revenue growth from $2.3-2.375B down to $2.275-2.3B, and cut its free cash flow estimate back to straddling the break even line – it had been $10-60M.  OIBDA guidance remained generally inline, as they narrowed guidance a bit below the midpoint of what it had been previously.  Here is a quick tabular summary of the company’s results in the context of the past four quarters:

$ in millions Q3/09 Q4/09






GCUK* 117 123 119 113 112
GC Impsat* 125 128 127 132 142
ROW* 311 306 308 310 314
Total Invest & Grow 553 557 554 555 568 2275-2300
Wholesale Voice 89 93 94 74 79
Total Revenue 643 651 648 630 648
Cost of Revenue 443 461 455 431 440
SG&A 109 107 116 106 99
OIBDA 91 83 77


109 400-415
Free Cash Flow +52 +72 -72 -13

-10 to 10

Capex & Capital Leases 33 49 55 63 43

– note that I don’t include intersegment revenue in the GCUK, Impsat, or ROW numbers in this table

Revenue:  Invest & Grow revenues surged in the quarter, just not mightily enough to stay inline with guidance.  GC Impsat pulled its weight, but GCUK clearly faltered (down 4% in constant currency) and ROW grew but nowhere near enough to keep guidance levels.  To make Invest & Grow guidance for the fourth quarter, the company will now need to check in at 598-623M, that’s still quite a steep ramp.

Costs & OIBDA:  OIBDA of $109M was roughly inline with expectations, as costs remained in check – SG&A came in especially low this quarter although I expect that will bounce back some. OIBDA margins rose to 16.8%, which is a good thing of course.  To make OIBDA guidance, they will need $121-136M in the fourth quarter.  That’s also a steep ramp, but I expect it won’t be hard to reach if in fact they make the revenue number.

Concluding thoughts: For those expecting an earnings preview, my apologies – I have a nasty head cold and just couldn’t get one together with the acquisition of Genesis Networks to write about.  But I would have been wrong, I did not anticipate a rough quarter on the revenue front.  No further information on the size and timing of the impact of the Genesis Networks acquisition on revenues or OIBDA was offered, but I expect that it will come up in the CC tomorrow morning in some form.

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Categories: Financials · Internet Backbones

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7 Comments So Far

  • carlk says:

    How much revenue could possibly be forecast from a paltry $27MM ticket which included $15MM in debt inside a landscape where significant competitors of popular brands already exist? The $12MM difference represents some multiple of annual sales and/or EBITDA, no? Is it one, two or three, with one being best on the revenue multiple? Tune in tomorrow @ 9:00 A.M. EST.

    With the exception of weak Capex in their current quarter, their numbers were great before the guidance let down.

    It’s good to hear that one of their fiercest competitors, (3), is going to be “growing” in Q4 by the guidance they released! 🙂

    • Rob Powell says:

      Yes, the Genesis deal certainly isn’t huge, but it would be useful to know if there was $5M or more in the updated full year guidance from the M&A and not from organic growth. The amount may simply not be material though.

  • Rob Powell says:

    I should note that analysts did not expect Global Crossing to reach their revenue guidance this quarter, and according to Yahoo Finance the same is true of their updated guidance. Will have to see what the market thinks of the report.

    • en_ron_hubbard says:

      Rob– below is a slightly more upbeat take on the results from Citi

      Quick Call — Global Crossing showed stable sequential revenue growth in its
      “core” Invest & Grow segment, while improving its OIBDA margin with help from
      the ROW/Impsat segments. Downwardly revised revenue guidance still implies a
      healthy revenue ramp in 4Q based on the timing of revenue benefits from
      previously announced short-term projects, organic growth of 2% sequentially, and
      some FX-related benefits. We maintain our Hold rating on GLBC with a revised tgt
      of $16, as results are encouraging for FY11 revenue growth, while we believe
      multiple expansion will partly depend on a meaningfully greater level of FCF
      generation for FY11. We still prefer Buy-rated Cogent ahead of its 3Q results.
       3Q Shows Better Revenue & OIBDA — Global Crossing reported better 3Q revenue
      of $648 mil. that was above our est. of $642 mil. & in-line with consensus $648
      mil. with Invest & Grow (I&G) outperforming our estimate by 60 bps on a modestly
      lower FX benefit of $3 mil. (seq.). Norm. OIBDA of $109 mil. was above our est. of
      $104 mil. and consensus of $101 mil. on a light gross profit contribution. Regional
      performance was better in LatAm & Rest of World (principally from wholesale) for
      both revenue & OIBDA, while GCUK was light of our estimates as the operations
      continue to experience a transition in the selling strategy. EPS loss of ($0.12) was
      better than our ($0.67) est. & consensus of ($0.73) as better OIBDA (8¢), lower
      D&A (21¢), & better other income (30¢) combined for a 59¢ benefit vs. our EPS
      est. FCF burn of ($1) mil. (ex capital leases) missed our ~$36 mil. est.
       Guidance Implies Favorable Ramp For 4Q — We expect management commentary
      to be upbeat on recent order flow on its 3Q conf. call. The reduction to the midpoint
      of its guidance ranges for revenue, OIBDA, and FCF were not surprising,
      while GLBC is still upbeat on 4Q that is partly based on the timing of recognizing
      revenue from short-term projects and some FX benefits. Implied guidance for 4Q
      comprises I&G revenue of $598-623 mil. vs. our revised est. of $600 mil.; OIBDA
      of $121-136 mil. vs. our est. of $122 mil.; and FCF (ex cap. leases) of $96-116
      mil. that includes IRU sales vs. our revised est. of ~$81 mil. We have upwardly
      revised our norm. FY11 I&G revenue growth rate 60 bps to 6% yoy & total revenue
      growth to ~4%, while still forecasting modest FCF ex cap. leases of ~$50 mil.

  • carlk says:

    I estimated that (3) already used about $60MM of their “convert” cash inclusive of the pro forma effects after the “green shoe” for investments which came in Q3. Indeed, they continue investing in CDN “growth” with partners like DISNEY.

  • jjl says:

    Easy to undestand folks
    the only driver is LATAM and LATAM only driver is Brazil
    no more tham that
    curiuos tha MR Legere only visited Colombia oftenly ,and only twice brasil after 3 years
    his priorities are a bit different than company priorities

    • I know Colombia says:

      Colombia is a very interesting market right now. It is LATAM’s 3rd largest country by population (behind Mexico and Brazil) and is probably one of the most prosperous places in the region right now (after they exported the drug cartels to Mexico, Colombia is almost unrecognizable!). It has some 4 cities with over 2 million people and Bogota is close to 8 million people. Telecom infrastructure is still behind more mature markets (like mex and bra). Telefonica, Telmex, and ETB/EPM (long time incumbents there) are pouring money hands over fists there to keep up with demand. Not sure what Global Crossing is doing there but it is one of those places they should be paying a lot of attention to. Not a bad spot for Legere to hang around (+ great restaurants and beautiful women).

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