Global Crossing Reports, Surges to Meet Guidance

glbc reported Q4 and full year 2010 earnings after the market close, posting a surge in both revenue and OIBDA.  The company had forecast such a surge in the second half, but I had had some doubts it would materialize even with the help of non-recurring items.  Actually, my estimates yesterday weren’t too far off, not including the $4M in revenue that derived from the Genesis acquisition.  Here’s a quick look at the company’s numbers in context:

$ in millions	Q4/09	Q1/10	Q2/10	Q3/10	Q4/10 (actual)	FY2010	FY2011 (guidance)
– GCUK*	123	119	113	112	128	472
– GC Impsat*	131	129	134	145	151	559
– ROW*	316	312	314	317	335	1278
– Intersegment Eliminations	(13)	(6)	(6)	(6)	(12)	(30)
Total Invest & Grow	557	554	555	568	602	2278	+6-9%
– Wholesale Voice	93	94	74	79	81	328
Total Revenue	651	648	630	648	683	2609
– Cost of Revenue	461	455	431	440	452	1778
– SG&A	107	116	106	99	110	431
OIBDA	83	77	93	109	121	400	425 (midpoint)
Free Cash Flow	72	(72)	(13)	(1)	102	16	> 0
Capex & Capital Leases	49	55	63	43	64	225

* in the past, I have excluded intersegment revenue from each segment’s revenues, but I have reversed that choice to start 2011

Revenue: As expected, part of the 6% sequential surge came from non-recurring items, including $6M from the end of a customer contract and $7M from equipment sales.  But even neglecting those and the $4M inorganic contribution from Genesis, they saw 3% sequential revenue growth, which was a solid number.  A big chunk of it came in the UK, reversing three consecutive sequential declines there mostly but not all due to those non-recurring items.  ROW revenues finally broke out of the $310-320 range they had been loitering in for so long, which is a good sign.  Guidance of 6-9% growth in 2011 Invest & Grow revenues works out to $2.415-2.485B, with a midpoint of $2.450B which seems to mesh comfortably with analyst estimates for total revenues of $2.75B.

OIBDA: OIBDA of $121 in the fourth quarter was just enough to reach the bottom rung of the full year guidance of $400-425M.  That corresponded to OIBDA margins of 17.7% – helped slightly perhaps by those one time items.  Nevertheless, guidance for 2010 of $425M at the midpoint of the revenue number reflects annual OIBDA margins of around 17% or higher, which is certainly a trend in the right direction.

Free Cash Flow: The usual Q4 working capital swing did its magic and brought the company’s full year free cash flow back above zero to a positive $16M.  As for 2011, they projected positive free cash flow but didn’t give too many specifics.  That suggests they may be leaving room for higher capex levels, or that they are just being cautious given how difficult FCF is to predict.

On M&A: The company said that the environment for M&A has improved somewhat over recent quarters, and that they are of course always looking at options.

On Those Layoffs: Last month I mentioned hearing about a round of layoffs, and I wondered if we’d hear more.  We didn’t, so whatever process they went through after New Year’s didn’t rise to the threshold of having to report it.  But it apparently didn’t reflect further revenue weakness than that seen in the previous Q3 earnings release.

Thinking ahead toward Q1: Stripping out the non-recurring items and adding another million or two for a full quarter of revenues from Genesis, the base from which the company starts the year is a quarterly run rate of perhaps $590M in Invest & Grow revenue, and perhaps $670M in total revenue.  Q4 is usually a bit stronger seasonally, so perhaps we ought to think of Q1 in similar terms.  Going into today, analysts were projecting a total number more like $684 according to Yahoo Finance, which seems a bit high to me but not out of reach.

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Categories: Financials · Internet Backbones