Global Crossing Ltd. (
Q2 2011 Earnings Call
July 27, 2011 9:00 am ET
Mark Gottlieb – Senior Vice President, Finance and Investor Relations
John J. Legere – Chief Executive Officer
John A. Kritzmacher – Executive Vice President, Chief Financial Officer
Donna Jaegers – D.A. Davidson & Company
Colby Synesael – Cowen & Co.
Vincent Walden – Thornburg Investments
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Ladies and gentlemen, thank you for standing by. Welcome to the Global Crossing Second Quarter 2011 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions)
As a reminder, this conference is being recorded Wednesday, July 27, 2011. It is now my pleasure to turn the conference over to Mark Gottlieb, Senior Vice President, Finance. Please go ahead sir.
Thanks, Tina. Good morning everyone and thank you for joining us today for our second quarter 2011 earnings call. John Legere, our Chief Executive Officer and John Kritzmacher, our Chief Financial Officer are here with us today. They will each share their comments, after which we will open the call for some questions.
Presentation slides can be viewed online to help follow our prepared remarks today. They are available via webcast, which you can access through our Investor Relations site. If you go to www.globalcrossing.com, access the investor site and follow the links to the webcast. Please note that the financial results discussed on this call are unaudited results and are subject to adjustments in our final audited results to be included in our Annual Report on Form 10-K.
Next, I would like to remind everyone that statements made herein that are not historical, financial results are forward-looking statements as defined in Section 21E of the Securities Exchange Act of 1934. Our actual results could differ materially from those projected in these forward-looking statements.
Factors that could cause the actual results to differ materially from those in these forward-looking statements are contained in our reports filed or furnished to the SEC including our annual reports on Form 10-K and quarterly reports on Form 10-Q.
We are not obligated to publicly update or revise these forward-looking statements to reflect future events or developments except as required by law. Information contained herein is in summary format only and is qualified in its entirety by reference to the financial statements and other information contained in our Forms 10-K and 10-Q.
We refer you to our financial press releases posted at www.globalcrossing.com, which include explanations of and reconciliations with the closest GAAP financial measures for our non-GAAP measures such as operating income before depreciation and amortization or OIBDA, free cash flow and constant currency measures.
With that, I’ll turn the call over to John Legere.
John J. Legere
Okay. Thank you, Mark. Good morning, good afternoon or good evening and thank you everybody for joining us. Let me begin with a few comments on the progress that we made regarding the definitive agreement to combine with Level3 that we announced in April of this year.
The combination with Level3 is progressing in all aspects relating to the anticipated closing and successful integration. The regulatory process is moving forward, integration planning is well underway and Level3 has made substantial progress towards refinancing the Global Crossing debt at very attractive rates. We continue to expect the combination to close before the end of the year.
As I said last time, we remain very excited about the compelling strategic fit of the two companies in the value it creates for our customers and for our investors. The combined company will have increased Global product in network scale to better serve our customers while producing significant cost synergies.
This will result in the company that is more competitive and compelling alternative to the incumbents around the globe. Meanwhile, Global Crossing remains very focused on operating of business and executing our strategy. I am pleased to report that this execution resulted in strong sequential improvements in our financial performance for the quarter as well as positive leading indicators that demonstrate strong operating momentum. We continue to successfully move up the value chain and capture growth opportunities for advanced IP, Ethernet, data center, managed collaboration and Cloud based solutions and all the application they enable.
Now let me move in to a brief summary of our second quarter financial results. I’m pleased to report that in the second quarter, our strategic invest and grow revenue, which consists of our business serving global enterprises and carrier customers excluding wholesale voice increased 6% sequentially and 12% year-over-year. OIBDA increased 14% sequentially and 3% year-over-year. This growth is consistent with the annual guidance we provided in February. We also improved our free cash flow generating $10 million of free cash flow in the second quarter.
We had our second consecutive breaking record order intake with average orders of $5 million of monthly recurring revenue. This order intake surpassed our prior record volume of $4.8 million, which was achieved just last quarter. As a key leading indicator, it provides a solid foundation from future growth. The quality of our order book continues to be driven by VPNs over IP and Ethernet, broadband services as well as hosting, managed and collaboration services.
Contributing to these improvements in order intake is our continuing investment in sales resources as we have added approximately 10% to our quota bearing sales professionals since the end of last year. Revenue attrition, which includes repricing of contracts and disconnects was in line with historical levels, which was down from slightly higher seasonal attrition levels in the first quarter.