International backbone and IP solutions operator glbc reported Q1/2011 earnings today, three weeks after the long anticipated announcement of its intended purchase by Level 3 for $3B. Global Crossing had finished off 2010 with a fourth quarter of strong revenue growth, and had forecast an uptick in organic growth for 2011 overall though not sequentially due to non-recurring items in the UK for Q4 plus the usual seasonality. In the first quarter they posted revenues of $661 and EBITDA of $84, which lagged composite analyst expectations, but didn’t surprise me much while the company maintained its full year guidance. Here is a quick table of their numbers in the context of prior quarters:
|$ in millions||Q1/10||Q2/10||Q3/10||Q4/10||Q1/11||FY2011
|– GC Impsat||129||134||145||151||148|
|– Intersegment Eliminations||(6)||(6)||(6)||(12)||(8)|
|Total Invest & Grow||554||555||568||602
|– Wholesale Voice||94||74||79||81||74|
|– Cost of Revenue||455||431||440||452||456|
|Free Cash Flow||(72)||(13)
|Capex & Capital Leases||55||63||43||64||52|
Revenue: Total revenues were up 6% over the same quarter last year, but down 3% sequentially. The two main components of that were the $13M in non-recurring revenue in the UK for Q1 as well as a $7M sequential decline in its wholesale voice business – which is managed for margin. Beyond those, total invest & grow revenues still declined sequentially but just by $2M, which isn’t too far off although it won’t win any prizes. As always, the bulk of the growth needed to make guidance is weighted toward the second half of the year. According to company management, both the sales pipeline and pricing trends remain were they ought to be.
Costs & EBITDA: Both cost of revenue and SG&A went up sequentially as forecast, and combined with lower revenues we saw EBITDA therefore fall back from Q4 levels to $84M, which was nonetheless up well from last year.
Cash & Capex: The company burned $93M in free cash flow during the quarter, mostly due to the usual working capital swings. Spending on capex and capital leases was $52M, within the usual range.
Final Thoughts: Given the two more quarters or so we will have to wait until the deal with Level 3 is complete, I asked company management about possible effects prior to the close on both capex spending/buildout plans for datacenter/cloud expansions and possible churn from customer overlap, but they did not anticipate anything material.
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