Global Crossing CEO Discusses Q3 2010 Results – Earnings Call Transcript

Global Crossing CEO Discusses Q3 2010 Results â¿¿ Earnings Call Transcript
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Global Crossing, Ltd. (



Q3 2010 Earnings Conference Call

November 2, 2010 9:00 AM ET


Mark Gottlieb – SVP, Finance and IR

John Legere – CEO

John Kritzmacher – EVP and CFO

Dave Carey – EVP and Chief Marketing Officer

Ted Higase – Managing Director, EMEA

Gary Breauninger – CFO, North America and Worldwide Carrier Services


Michael Rollins – Citi Investment Research

Donna Jaegers – D.A. Davidson

Jason Armstrong – Goldman Sachs

Romeo Reyes – Jefferies & Company

Murray Arenson – BGB Securities

Mark Gottlieb – SVP, Finance and IR



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Welcome to the Global Crossing’s third quarter 2010 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 Tuesday, November 2nd, 2010. I would now like to turn the conference over to Mr. Mark Gottlieb, Senior Vice President, Finance and Investor Relations. Please go ahead, sir.

Mark Gottlieb

Thank you. Good morning, everyone. Thank for joining us today for third quarter 2010 earnings call. John Legere, our Chief Executive Officer; and, John Kritzmacher, our Chief Financial Officer are here with us today. They’ll each share their comments, after which we’ll open the call for some questions. Presentation slides can be viewed to help follow our prepared remarks. They’re available via webcast, which you can access through our Investor Relations Webcast. If you go to, access the Investor site and follow the links to the webcast.

Before we begin, I’d 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 the forward-looking statements are contained in our reports filed or furnished to the Securities and Exchange Commission, including our annual reports on Form 10-K and quarterly reports on Form 10-Q.

We’re 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 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 our financial press releases posted at, which includes 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 Legere

Okay, thank you Mark. Good morning, everyone and thank you for joining us. We at Global Crossing continue to execute on our strategy to deliver advanced global IP, Ethernet, and data center solutions with an unsurpassed customer experience to enterprises, carriers, and governments around the world.

Now, before turning to John Kritzmacher for a detailed discussion of financial performance, I’m going to comment on our third quarter results and then, share our view of the market and our progress on executing our strategy.

Let’s move into a brief summary of our financial performance in the quarter. Ongoing demand for our value added IP, data center, and managed services, continues to drive improvement in our operational financial performance. I’m pleased to report that we continued to sequentially improve our core invest and grow revenue.

With the significant operating leverage in our business, our revenue growth carried through to further improvements in both OIBDA and free cash flow. We expect to maintain this operating momentum as we make our way through the fourth quarter.

We generated $648 million of consolidated revenue during the third quarter. Revenue for our strategic invest and grow services increased 2% sequentially. This operational growth contributed to a 17% sequential improvement in OIBDA to $109 million and free cash flow improvement of $12 million.

Now, let me provide further insight into the performance in each of our regions starting with Latin America. In constant currency terms, Global Crossing Impsat generated strong year-over-year invest and grow revenue growth of 12%, which translated to year-over-year OIBDA growth of 9%.

Sales orders and revenue continued to show healthy growth in most Latin American country, particularly in Brazil and Colombia. In fact, Brazil’s business has expanded significantly and continues to lead Global Crossing Impsat operations in both revenue and OIBDA contribution.

Our revenue mix in Global Crossing Impsat continues to migrate towards IP and value added services with IP VPN, network management and data center managed services as the fastest growing areas. Fifteen of our 17 global data centers serve customers with evolving requirements in the fast growing Latin American region. Market trends continue to reflect increasing demand for converged information and communications technology to enable productivity gains and cost savings for enterprises. Our exposure to these products and services in one of the faster growing regions of the world has been a significant contributor to our growth.

Let me move on now to our Rest of World region, which consists primarily of our North American operations. In constant currency terms, we reported a year-over-year increase in invest and grow revenue of 3% and OIBDA growth of 64% as we continue to scale that business while managing our cost. The enterprise market continues to perform well as we see growth coming from both new and existing customers. Order activity has increased compared to 2009 as enterprises continue to migrate to IP-based solutions to reduce cost and improve efficiency including their own adoption of higher margin managed services.

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