Awaiting the Level 3 Deal, Global Crossing Generates Some Solid Growth

July 27th, 2011 by · Leave a Comment

International IP solutions provider glbc found itself some substantial growth in the second quarter.  Revenues advanced in all three of their geographical segments, partly buoyed by $9M in termination revenues and some favorable currency fluctuations.  Backing those out, they seem to have met or slightly beat market estimates (and my own) for invest and grow revenues.  Here's a quick summary of the company's performance in context:

$ in millions Q2/10 Q3/10 Q4/10 Q1/11 Q2/11
- GCUK 113 112 128 113 116
- GC Impsat 134 145 151 148 163
- ROW 314 317 335 326 349
- Intersegment Eliminations (6) (6) (12) (8) (6)
Total Invest & Grow 555 568 602 587 622
- Wholesale Voice 74 79 81 74 69
Total Revenue 630 648 683 661 692
- Cost of Revenue 431 440 452 456 468
- SG&A 106 99 110 121 128
OIBDA 93 109 121 84 96
Free Cash Flow (13) (1) 102 (93) 10
Capex & Capital Leases 63 43 64 52  59

Revenues:  As usual, the strongest segment was Latin America, where their GC Impsat division managed an impressive 7% sequential growth in constant currency terms.  The Rest-of-world numbers were boosted by that $9M in termination revenues - most in the USA with a bit from continental Europe, but even after that saw 3-4% growth beyond those currency effects. In constant currency terms, the UK was the only decliner - the company continues to face some pricing pressure there which is holding back growth.  The company's wholesale voice business, which they run for margin rather than growth, shrank a bit to $69M.

Costs & OIBDA:  OIBDA of $96M included favorable effects from those termination revenues that were offset by higher bonuses and fees related to the Level 3 transaction tha contributed to a higher SG&A.  OIBDA margins of 13.9% were about normal for the company, though of course higher would be better.

Capex and Cash Flows:  Capex levels of $59M for the quarter were inline with expectations, as was the $10M in positive free cash flow.  With the Level 3 deal pending I expect they have kept and will keep a tight rein on both.

Final Thoughts:  Global Crossing had a solid Q2 that won't do it or the Level 3 deal any damage.  They aren't saying much on the regulatory front about the DOJ's second request and all that, beyond reaffirming their expectations for a close by the end of the year.

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Categories: Financials · Internet Backbones

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