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

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