Global Crossing earnings on track
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Global Crossing’s second quarter earnings lived up to advance billing, as the company was able to post its first sequential growth in consolidated revenue for three years, as well as positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) status for the month of June. In addition, Global Crossing remains on track to hit cash flow positive status later this year, CEO John Legere told financial analysts.
Overall, the company reported a loss of $77 million, compared with $109 million in the first quarter of 2005, on consolidated revenues of $461 million, up from $456 million in the first quarter of 2005, but down from $499 million in the year-previous quarter. Adjusted EBITDA was a loss of $17 million, a 62% improvement sequentially.
The sequential earnings growth is significant because it shows Global Crossing’s strategy of walking away from low-margin business is beginning to pay offer, Legere said. The ‘invest and grow’ or higher margin portion of the business grew 5% sequentially to $299 million in the quarter.
“We expect this trend to continue,” he said in the analyst earnings call. “We generated positive adjusted EBIDTA in June and expect this trend to continue on a quarterly basis going forward.”
Among the factors driving Global Crossing’s success, Legere said, are increased demand for IP services, continued market consolidation in North America and the U.K. and “relative firmness” in pricing that had been trending downward. As Global Crossing regains its financial footing, he added, the company is more attractive to enterprise customers.
“Consolidation has clearly moved us up the food chain in NA an UK where we are one of a fewer set of companies to choose from,” Legere said. “It’s only recently that we have achieved a financial stability that now has customers willing to migrate stronger with us. Global Crossing is now a viable option, we’ve moved a few chairs up the food chain.”
About one-third of its business growth comes from new customers, he added.
Global Crossing also is able to serve its “invest and grow” customers more efficiently, Legere said, which aided in its cost control. The company improved its adjusted gross margin by $4 million sequentially, cut its cost of revenue by 2% or $8 million and reduced its sales, general and administration costs by 15% or $15 million.
During the quarter, Global Crossing raised $384 million in combined sales of common stock and senior convertible notes, and Legere said the company will use this money to continue improving its network and ponder acquisition possibilities.
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