10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2017
	or
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ____ to ____

Commission File Number 001-35965

GTT Communications, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	20-2096338
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

7900 Tysons One Place

Suite 1450

McLean, Virginia 22102

(Address including zip code of principal executive offices)

(703) 442-5500

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 

Large Accelerated Filer ¨	Accelerated Filer þ
Non-Accelerated Filer ¨	(Do not check if a smaller reporting company)
Smaller reporting company ¨	Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of August 3, 2017, 41,378,971 shares of common stock, par value $.0001 per share, of the registrant were outstanding.

	Page
PART I — FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Income (Loss)	5
Condensed Consolidated Statement of Stockholders’ Equity	6
Condensed Consolidated Statements of Cash Flows	7
Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3. Quantitative and Qualitative Disclosures about Market Risk	38
Item 4. Controls and Procedures	39
PART II — OTHER INFORMATION	40
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	41
SIGNATURES	42
CERTIFICATIONS

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GTT Communications, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except for share and per share data) 

	June 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	130,739		$	29,748
Accounts receivable, net of allowances of $3,730 and $2,656, respectively	99,977			76,292
Deferred costs	3,195			3,415
Prepaid expenses	20,534			5,765
Other assets	5,498			3,565
Total current assets	259,943			118,785
Restricted cash and cash equivalents	—			304,266
Property and equipment, net	470,292			43,369
Intangible assets, net	395,472			193,936
Goodwill	490,196			280,593
Other long-term assets	33,668			12,312
Total assets	$	1,649,571		$	953,261
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	21,845		$	11,334
Accrued expenses and other current liabilities	54,586			36,888
Acquisition earn-outs and holdbacks	17,757			24,379
Current portion of capital lease obligations	1,648			1,015
Current portion of long-term debt	7,000			4,300
Deferred revenue	50,693			17,875
Total current liabilities	153,529			95,791
Capital lease obligations, long-term portion	769			120
Long-term debt	1,108,807			725,208
Deferred revenue, long-term portion	116,294			3,416
Deferred tax liability	28,649			—
Other long-term liabilities	19,906			967
Total liabilities	1,427,954			825,502
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 41,272,319 and 37,228,144 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	4			3
Additional paid-in capital	291,885			197,326
Accumulated deficit	(65,856		)	(64,641		)
Accumulated other comprehensive loss	(4,416		)	(4,929		)
Total stockholders’ equity	221,617			127,759
Total liabilities and stockholders’ equity	$	1,649,571		$	953,261

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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GTT Communications, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands, except for share and per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue:
Telecommunications services	$	186,216		$	128,914		$	368,580		$	253,350
Operating expenses:
Cost of telecommunications services	93,418			68,272			184,787			134,469
Selling, general and administrative expenses	46,696			35,940			99,628			68,134
Severance, restructuring and other exit costs	52			—			10,723			1,495
Depreciation and amortization	31,463			15,661			61,823			31,260
Total operating expenses	171,629			119,873			356,961			235,358
Operating income	14,587			9,041			11,619			17,992
Other expense:
Interest expense, net	(16,623		)	(7,125		)	(32,455		)	(14,497		)
Loss on debt extinguishment	—			(1,632		)	(5,659		)	(1,632		)
Other expense, net	70			(188		)	(38		)	(467		)
Total other expense	(16,553		)	(8,945		)	(38,152		)	(16,596		)
(Loss) income before income taxes	(1,966		)	96			(26,533		)	1,396
(Benefit from) provision for income taxes	(2,615		)	5			(14,071		)	409
Net income (loss)	$	649		$	91		$	(12,462	)	$	987
Earnings (loss) per share:
Basic	$	0.02		$	—		$	(0.31	)	$	0.03
Diluted	$	0.02		$	—		$	(0.31	)	$	0.03
Weighted average shares:
Basic	41,244,595			37,065,651			40,849,853			37,016,720
Diluted	41,819,377			37,678,120			40,849,853			37,575,397

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

4

GTT Communications, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Amounts in thousands)

	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017			2016
Net income (loss)	$	649	$	91		$	(12,462	)	$	987
Other comprehensive income (loss):
Foreign currency translation adjustment	127		(1,733		)	513			(1,911		)
Comprehensive income (loss)	$	776	$	(1,642	)	$	(11,949	)	$	(924	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

5

GTT Communications, Inc.

Condensed Consolidated Statement of Stockholders’ Equity

(Unaudited)

(Amounts in thousands, except for share data)

	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
	Shares		Amount
Balance, December 31, 2016	37,228,144		$	3	$	197,326		$	(64,641	)	$	(4,929	)	$	127,759
Share-based compensation for options issued	—		—		766			—			—			766
Share-based compensation for restricted stock issued	608,324		—		9,136			—			—			9,136
Tax withholding related to the vesting of restricted stock units	(155,389	)	—		(2,307		)	—			—			(2,307		)
Stock issued in connection with employee stock purchase plan	13,208		—		289			—			—			289
Stock issued in connection with acquisition	3,329,872		1		86,091			—			—			86,092
Stock options exercised	248,160		—		584			—			—			584
Cumulative effect of adjustment for unrecognized windfall benefits	—		—		—			11,247			—			11,247
Net loss	—		—		—			(12,462		)	—			(12,462		)
Foreign currency translation	—		—		—			—			513			513
Balance, June 30, 2017	41,272,319		$	4	$	291,885		$	(65,856	)	$	(4,416	)	$	221,617

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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GTT Communications, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	Six Months Ended June 30,
	2017			2016
Cash flows from operating activities:
Net (loss) income	$	(12,462	)	$	987
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	61,823			31,260
Share-based compensation	9,902			6,052
Debt discount amortization	499			341
Loss on debt extinguishment	5,659			1,632
Amortization of debt issuance costs	1,646			850
Excess tax benefit from stock-based compensation	(3,585		)	—
Deferred income taxes	(9,890		)	—
Non-cash deferred revenue	(21,346		)	(3,312		)
Non-cash deferred costs	3,838			1,322
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(1,271		)	(7,941		)
Prepaid expenses and other current assets	1,025			(1,236		)
Deferred costs and other assets	49			(910		)
Accounts payable	(9,581		)	(10,612		)
Accrued expenses and other current liabilities	(2,554		)	(1,720		)
Deferred revenue and other liabilities	2,509			2,643
Net cash provided by operating activities	26,261			19,356
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(552,500		)	(13,751		)
Purchase of customer contracts	(14,943		)	(6,000		)
Change in restricted cash and cash equivalents	304,266			—
Purchases of property and equipment	(17,752		)	(12,288		)
Net cash used in investing activities	(280,929		)	(32,039		)
Cash flows from financing activities:
Proceeds from revolving line of credit	—			30,000
Repayment of revolving line of credit	(20,000		)	(29,000		)
Proceeds from term loan	696,500			29,850
Repayment of term loan	(429,275		)	(2,075		)
Proceeds from senior note	159,000			—
Payment of earn-out and holdbacks	(20,257		)	(10,862		)
Debt issuance costs	(27,730		)	(904		)
Repayment of capital leases	(624		)	(538		)
Proceeds from issuance of common stock under employee stock purchase plan	289			—
Tax withholding related to the vesting of restricted stock units	(2,307		)	(1,635		)
Exercise of stock options	584			224
Net cash provided by financing activities	356,180			15,060
Effect of exchange rate changes on cash	(521		)	(1,634		)
Net increase in cash and cash equivalents	100,991			743
Cash and cash equivalents at beginning of period	29,748			14,630
Cash and cash equivalents at end of period	$	130,739		$	15,373
Supplemental disclosure of cash flow information:
Cash paid for interest	$	30,789		$	13,256
Cash paid for income taxes	$	592		$	284

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

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GTT Communications, Inc. 

Notes to Condensed Consolidated Financial Statements

NOTE 1 — ORGANIZATION AND BUSINESS

Organization and Business

GTT Communications, Inc. (“GTT” or the "Company") is a provider of cloud networking services to multinational clients. The Company offers a broad portfolio of global services including: private networking services, Internet services, optical transport, managed networking and security services, voice and unified communication services, and video transport services.

GTT's global Tier 1 IP network delivers connectivity to clients around the world. The Company provides services to leading multinational enterprise, carrier, and government customers.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed on March 8, 2017. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.

The condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and its results of operations. The operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year 2017 or for any other interim period. The December 31, 2016 consolidated balance sheet is condensed from the audited financial statements as of that date, but does not include all disclosures required by GAAP.

Reclassification Within Condensed Consolidated Statement of Cash Flows

As a result of further policy alignment related to acquired businesses, certain prior period amounts in the condensed consolidated statements of cash flows, have been reclassified to conform with the current period presentation to better reflect the nature of these activities. The Company has reclassified $3.3 million from the "Deferred revenue and other liabilities" line to the "Non-cash deferred revenue" line and $1.3 million from the "Deferred costs and other assets" line to the "Non-cash deferred costs" line for the six months endedJune 30, 2016. These reclassifications had no impact on the net change in cash and cash equivalents or cash flows from operating, investing and financing activities for any periods presented.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when establishing allowances for doubtful accounts and accruals for billing disputes, determining useful lives for depreciation and amortization and accruals for exit activities, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, accounting for income taxes and related valuation allowances against deferred tax assets and estimating the grant date fair values used to compute the share-based compensation expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

Segment Reporting

The Company reports operating results and financial data in one operating and reporting segment. The chief operating decision maker manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across its entire customer base, and provide incentives to employees based on the success of the organization as a whole. Although

8

certain information regarding selected products or services are discussed for purposes of promoting an understanding of the Company's complex business, the chief operating decision maker manages the Company and allocates resources at the consolidated level.

Revenue Recognition

The Company delivers six primary services to its customers — optical transport, WAN connectivity services, high bandwidth Internet connectivity services, managed network and security services, global communication and collaboration services, and video transport services. Certain of its current commercial activities have features that may be considered multiple elements, specifically when the Company sells its connectivity services in addition to customer premise equipment ("CPE"). The Company believes that there is sufficient evidence to determine each element’s fair value and, as a result, in those arrangements where there are multiple elements, the service revenue is recorded ratably over the term of the agreement and the equipment is accounted for as a sale, at the time of sale as long as collectability is reasonably assured.

The Company's services are provided under contracts that typically include an installation charge along with payments of recurring charges on a monthly basis for use of the services over a committed term. Its contracts with customers specify the terms and conditions for providing such services, including installation date, recurring and non-recurring fees, payment terms, and length of term. These contracts call for the Company to provide the service in question (e.g., data transmission between point A and point Z), to manage the activation process, and to provide ongoing support (in the form of service maintenance and trouble-shooting) during the service term. The contracts do not typically provide the customer any rights to use specifically identifiable assets. Furthermore, the contracts generally provide the Company with discretion to engineer (or re-engineer) a particular network solution to satisfy each customer’s data transmission requirement, and typically prohibit physical access by the customer to the network infrastructure used by the Company and its suppliers to deliver the services.

The Company recognizes revenue as follows:

Recurring Revenue. Recurring revenue represents the substantial majority of the Company's revenue, and consists of fees charged for ongoing services that are generally fixed in price and billed on a recurring monthly basis (one month in advance) for a specified term. At the end of the term, most contracts provide for a continuation of services on the same terms, either for a specified renewal period (e.g., one year) or on a month-to-month basis. The Company records recurring revenue based on the fees agreed to in each contract, as long as the contract is in effect.

Usage Revenue. Usage revenue represents variable charges for certain services, based on specific usage of those services, or usage above a fixed threshold, billed monthly in arrears. The Company records usage revenue based on actual usage charges billed using the rates and/or thresholds specified in each contract.

Non-recurring Revenue. Non-recurring revenue consists of charges for installation in connection with the delivery of recurring communications services, late payments, cancellation fees, early termination fees, and equipment sales. Fees billed for installation services are initially recorded as deferred revenue then recognized ratably over the contractual term of the recurring service. Fees charged for late payments, cancellation (pre-installation) or early termination (post-installation) are typically fixed or determinable per the terms of the respective contract, and are recognized as revenue when billed. In addition, from time to time the Company sells communications and/or networking equipment to its customers in connection with its data networking services. The Company recognizes revenue from the sale of equipment at the contracted selling price when title to the equipment passes to the customer (generally F.O.B. origin).

Prepaid Capacity Sales and Indefeasible Right to Use. From time to time we sell capacity on a long-term basis, where a certain portion of the contracted revenue is prepaid upon acceptance of the service by the customer. This prepaid amount is initially recorded as deferred revenue and amortized ratably over the term of the contract. Certain of these prepaid capacity sales are in the form of Indefeasible Rights to Use ("IRUs"), where the customer has the right to use the capacity for the life of the fiber optic cable.  In the case of IRUs, any up-front payments are recognized ratably over a 20 year term, consistent with our assumed useful life of the associated fiber optic cable.

The Company records revenue only when collectability is reasonably assured, irrespective of the type of revenue.

Universal Service Fund ("USF"), Gross Receipts Taxes and Other Surcharges

The Company is liable in certain cases for collecting regulatory fees and/or certain sales taxes from its customers and remitting the fees and taxes to the applicable governing authorities. Where the Company collects on behalf of a regulatory agency, the Company does not record any revenue. The Company records applicable taxes on a net basis.

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Cost of Telecommunications Services

Cost of telecommunications services includes direct costs incurred in accessing other telecommunications providers’ networks in order to maintain the Company's global IP network and provide telecommunication services to the Company's customers, including access, co-location, and usage-based charges.

Share-Based Compensation

The Company issues three types of equity grants under its share-based compensation plan: time-based restricted stock, time-based stock options and performance-based restricted stock. The time-based restricted stock and stock options generally vest over a four-year period, contingent upon meeting the requisite service period requirement. Performance awards typically vest over a shorter period, e.g. one to two years, starting when the performance criteria established in the grant have been met.

The share price of the Company's common stock as reported on the NYSE MKT on the date of grant is used as the fair value for all restricted stock. The Company uses the Black-Scholes option-pricing model to determine the estimated fair value for stock options. Critical inputs into the Black-Scholes option-pricing model include the following: option exercise price; fair value of the stock price; expected life of the option; annualized volatility of the stock; annual rate of quarterly dividends on the stock; and risk-free interest rate.

Implied volatility is calculated as of each grant date based on our historical stock price volatility along with an assessment of a peer group. Other than the expected life of the option, volatility is the most sensitive input to our option grants. The risk-free interest rate used in the Black-Scholes option-pricing model is determined by referencing the U.S. Treasury yield curve rates with the remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on our historical analysis of attrition levels. Forfeiture estimates are updated quarterly for actual forfeitures.

The expense is recognized on a straight-line basis over the vesting period. The Company recognizes share-based compensation expense for performance awards when the Company considers the achievement of the performance criteria to be probable.

Income Taxes

Income taxes are accounted for under the asset and liability method pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the expected future consequences attributable to the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. Further, deferred tax assets are recognized for the expected realization of available net operating loss and tax credit carryforwards. A valuation allowance is recorded on gross deferred tax assets when it is “more likely than not” that such asset will not be realized. When evaluating the realizability of deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies, and expectations of future earnings. The Company reviews its deferred tax assets on a quarterly basis to determine if a valuation allowance is required based upon these factors. Changes in the Company's assessment of the need for a valuation allowance could give rise to a change in such allowance, potentially resulting in additional expense or benefit in the period of change.

The Company's income tax provision includes U.S. federal, state, local and foreign income taxes and is based on pre-tax income or loss. In determining the annual effective income tax rate, the Company analyzes various factors, including its annual earnings and taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes and its ability to use tax credits and net operating loss carryforwards.

Under GAAP for income taxes, the amount of tax benefit to be recognized is the amount of benefit that is “more likely than not” to be sustained upon examination. The Company analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, the Company determines that uncertainties in tax positions exist, a liability is established in the consolidated financial statements. The Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for income taxes.

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Comprehensive Income (Loss)

In addition to net income (loss), comprehensive income (loss) includes certain charges or credits to equity occurring other than as a result of transactions with stockholders. For the Company, this consists of foreign currency translation adjustments.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income or (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect, in periods with earnings and in which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options.

The table below details the calculations of earnings (loss) per share (in thousands, except for share and per share amounts):  

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017			2016
Numerator for basic and diluted EPS – earnings (loss) available to common stockholders	$	649	$	91	$	(12,462	)	$	987
Denominator for basic EPS – weighted average shares	41,244,595		37,065,651		40,849,853			37,016,720
Effect of dilutive securities	574,782		612,469		—			558,677
Denominator for diluted EPS – weighted average shares	41,819,377		37,678,120		40,849,853			37,575,397
Earnings (loss) per share: basic	$	0.02	$	—	$	(0.31	)	$	0.03
Earnings (loss) per share: diluted	$	0.02	$	—	$	(0.31	)	$	0.03

There were approximately 880,000 anti-dilutive common shares as of June 30, 2017 that were excluded from the computation of loss per share. There were approximately 128,000 anti-dilutive common shares that were excluded from the computation of earnings per share as of June 30, 2016. 

Cash and Cash Equivalents

Cash and cash equivalents may include deposits with financial institutions as well as short-term money market instruments, certificates of deposit and debt instruments with maturities of three months or less when purchased.

The Company invests its cash and cash equivalents and short-term investments in accordance with the terms and conditions of its Credit Agreement, which seeks to ensure both liquidity and safety of principal. The Company’s policy limits investments to instruments issued by the U.S. government and commercial institutions with strong investment grade credit ratings, and places restrictions on the length of maturity. As of June 30, 2017, the Company held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or non-government guaranteed mortgage-backed securities.

Restricted Cash and Cash Equivalents

Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents. In December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024. The proceeds of the private offering plus 60 days of prepaid interest, were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia Networks ("Hibernia") that occurred in January 2017. The proceeds were released from escrow at closing to fund the Hibernia acquisition.

Accounts Receivable, Net

Accounts receivable balances are stated at amounts due from the customer net of an allowance for doubtful accounts. Credit extended is based on an evaluation of the customer’s financial condition and is granted to qualified customers on an unsecured basis.

The Company, pursuant to its standard service contracts, is entitled to impose a monthly finance charge of a certain percentage per month with respect to amounts that are past due. The Company’s standard terms require payment within 30 days of the date of

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the invoice. The Company treats invoices as past due when they remain unpaid, in whole or in part, beyond the payment date set forth in the applicable service contract.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade receivables are past due, the customer’s payment history and current ability to pay its obligation to the Company, and the condition of the general economy. Specific reserves are also established on a case-by-case basis by management. Credit losses have been within management's estimates. Actual bad debts, when determined, reduce the allowance, the adequacy of which management then reassesses. The Company writes off accounts after a determination by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management's determination that the costs of pursuing collection outweighs the likelihood of recovery. The allowance for doubtful accounts was $3.7 million and $2.7 million as of June 30, 2017 and December 31, 2016, respectively.

Deferred Costs

Installation costs related to provisioning of recurring communications services that the Company incurs from independent third party suppliers, directly attributable and necessary to fulfill a particular service contract, and which would not have been incurred but for the occurrence of that service contract, are recorded as deferred costs and expensed ratably over the contractual term of service in the same manner as the deferred revenue arising from that contract. Based on historical experience, the Company believes the initial contractual term is the best estimate for the period of earnings. If any installation costs exceed the amount of corresponding deferred revenue, the excess cost is recognized in the current period.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation.Depreciation on these assets is computed on a straight-line basis over the estimated useful lives of the assets. Assets are recorded at acquired cost plus any internal labor to prepare the asset for installation to become functional. Assets and liabilities under capital leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements and assets under capital leases are amortized over the shorter of the term of the lease, excluding optional extensions, or the useful life. Expenditures for maintenance and repairs are expensed as incurred. Depreciable lives used by the Company for its classes of assets are as follows:

Freehold Land and Buildings	30 years
Furniture and Fixtures	7 years
Fiber Optic Cable	20 years
Fiber Optic Network Equipment	5 - 15 years
Leasehold Improvements	up to 10 years
Computer Hardware and Software	3-5 years

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset were to exceed its estimated future undiscounted cash flows, the asset would be considered to be impaired. Impairment losses would then be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are reported at the lower of the carrying amount or fair value less costs to sell.

Software Capitalization

Software development costs include costs to develop software programs to be used solely to meet the Company's internal needs. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a function it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred. The Company capitalized software costs of $0.4 million and $0.4 million for the three months ended June 30, 2017 and 2016, respectively, and $0.8 million and $0.8 million for the six months endedJune 30, 2017 and 2016, respectively.

Goodwill and Intangible Assets

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Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in October, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill impairment. The Company's impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that fair value of the reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the Company against the planned results used in the last quantitative goodwill impairment test. Additionally, the Company's fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If it is determined under the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step quantitative impairment test is performed. Under the first step, the estimated fair value of the Company would be compared with its carrying value (including goodwill). If the fair value of the Company exceeds its carrying value, step two does not need to be performed. If the estimated fair value of the Company is less than its carrying value, an indication of goodwill impairment exists for the Company and it would need to perform step two of the impairment test. Under step two, an impairment loss would be recognized for any excess of the carrying amount of the Company's goodwill over the implied fair value of that goodwill. Fair value of the Company under the two-step assessment is determined using a combination of both income and market-based approaches. There were no goodwill impairments identified for the six months endedJune 30, 2017.

Intangible assets arising from business combinations, such as acquired customer contracts and relationships, (collectively "customer relationships"), trade names, intellectual property or know-how, are initially recorded at fair value. The Company amortizes these intangible assets over the determined useful life which ranges from three to seven years. The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized for the difference between fair value and the carrying value of the asset. There were no intangible asset impairments recognized for the six months endedJune 30, 2017.

Business Combinations

The Company includes the results of operations of the businesses that it acquires commencing on the respective dates of acquisition. The Company allocates the fair value of the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Asset Purchases

Periodically the Company acquires customer contracts that it accounts for as an asset purchase and records a corresponding intangible asset that is amortized over its estimated useful life. No goodwill is recorded in an asset acquisition. During the six months endedJune 30, 2017, the Company acquired customer contracts for an aggregate purchase price of $37.3 million, of which $14.9 million was paid during the six months ended June 30, 2017 at the acquisitions' respective closing dates. The remaining $22.4 million is expected to be paid in 2017 and 2018, subject to any indemnification claims made through the final payment date. During 2016, the Company acquired customer contracts for an aggregate purchase price of $41.3 million, of which $20.0 million was paid in 2016 at the respective closing dates, of which $6.0 million was paid during the six months ended June 30, 2016. Of the remaining $21.3 million, $18.0 million was paid during the six months ended June 30, 2017 and the remaining $3.3 million is expected to be paid in the remainder of 2017, subject to any indemnification claims made through the final payment dates.

Accrued Supplier Expenses

The Company accrues estimated charges owed to its suppliers for services. The Company bases this accrual on the supplier contract, the individual service order executed with the supplier for that service, and the length of time the service has been active.

Disputed Supplier Expenses

In the normal course of business, the Company identifies errors by suppliers with respect to the billing of services. The Company performs bill verification procedures to ensure that errors in the Company's suppliers' billed invoices are identified and resolved. If the Company concludes that a vendor has billed inaccurately, the Company will record a liability only for the amount that it believes is owed. As of June 30, 2017, the Company had open disputes not accrued for of $4.4 million. As of December 31, 2016, the Company had open disputes not accrued for of $5.8 million.

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Acquisition Earn-outs and Holdbacks

Acquisition earn-outs and holdbacks represent either contingent consideration subject to re-measurement to fair value, or fixed deferred consideration to be paid out at some point in the future, typically on the one-year anniversary of an acquisition. Contingent consideration is remeasured to fair value at each reporting period. The portion of the deferred consideration due within one year is recorded as a current liability until paid, and any consideration due beyond one year is recorded in other long-term liabilities.

As of June 30, 2017 and December 31, 2016, there was no contingent consideration subject to re-measurement outstanding.

Debt Issuance Costs

Debt issuance costs represent costs that qualify for deferral associated with the issuance of new debt or the modification of existing debt facilities. The unamortized balance of debt issuance costs is presented as a reduction to the carrying value of long-term debt. Debt issuance costs are amortized and recognized on the condensed consolidated statements of operations as interest expense. The unamortized debt issuance costs were $31.7 million and $9.3 million as of June 30, 2017 and December 31, 2016, respectively.

Original Issuance Discounts and Premiums

Original issuance discounts and premiums ("OID") is the difference between the face value of debt and the amount of principal received when the loan was originated. When the debt reaches maturity, the face value of the debt is payable. The Company recognizes OID by accretion of the discount or premium as interest expense, net over the term of the debt. The unamortized portion of the OID was a $1.0 million net premium and a $7.0 million discount as of June 30, 2017 and December 31, 2016, respectively.

Translation of Foreign Currencies

For non-U.S. subsidiaries, the local currency is the functional currency for financial reporting purposes. These condensed consolidated financial statements have been reported in U.S. Dollars by translating asset and liability amounts of foreign subsidiaries at the closing currency exchange rate, equity amounts at historical rates, and the results of operations and cash flow at the average currency exchange rate prevailing during the periods reported. The net effect of such translation gains and losses are reflected in accumulated other comprehensive loss in the stockholders' equity section of the condensed consolidated balance sheets.

 Transactions denominated in foreign currencies other than a subsidiary's functional currency are recorded at the rates of exchange prevailing at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising upon settlement of a transaction are reported in the condensed consolidated statements of operations in other expense, net.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following hierarchy of fair value:

Level 1: Quoted prices for identical assets or liabilities in active markets that can be assessed at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation.

When determining the fair value measurements for assets and liabilities required to be recorded at fair value, management considers the principal or most advantageous market in which it would transact and considers risks, restrictions, or other assumptions that market participants would use when pricing the asset or liability.

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As of June 30, 2017 and December 31, 2016, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, and acquisition earn-outs and holdbacks approximated fair value due to the short-term nature of these instruments.

The table below presents the fair values for the Company's long-term debt as well as the input level used to determine these fair values as of June 30, 2017 and December 31, 2016. The carrying amounts exclude any debt issuance costs or original issuance discount:

					Fair Value Measurement Using
	Total Carrying Value in Consolidated Balance Sheet				Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (1) (Level 1)
(amounts in thousands)	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
Liabilities not recorded at fair value in the Financial Statements:
Long-term debt, including the current portion:
Term loan	$	696,500	$	425,775	$	699,111	$	425,775
Senior notes	450,000		300,000		479,250		300,000
Total long-term debt, including current portion	$	1,146,500	$	725,775	$	1,178,361	$	725,775

⁽¹⁾ Fair value based on the bid quoted price.

Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets. Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).

Concentrations of Credit Risk

Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. At times during the periods presented, the Company had funds in excess of $250,000 insured by the U.S. Federal Deposit Insurance Corporation, or in excess of similar Deposit Insurance programs outside of the United States, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

The Company's trade accounts receivable are generally unsecured and geographically dispersed. No single customer's trade accounts receivable balance as of June 30, 2017 or December 31, 2016 exceeded 10% of the Company's consolidated accounts receivable, net. No single customer accounted for more than 10% of revenue for the six months ended June 30, 2017 and 2016.

Newly Adopted Accounting Principles

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions. The ASU changes five aspects of the accounting for share-based payment award transactions: (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for taxes. The Company adopted ASU 2016-09 effective January 1, 2017. Excess tax benefits for share-based payments are now recognized against income tax expense rather than additional paid-in capital and are included in operating cash flows rather than financing cash flows. The recognition of excess tax benefits has been applied on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. As of January 1, 2017, the cumulative effect of adopting ASU 2016-09 was an increase in deferred tax assets of $11.2 million and a decrease in accumulated deficit of $11.2 million as a result of recognizing $27.8 million previously unrecognized excess tax benefits from share-based compensation. The Company will continue to account for forfeitures as they occur. Cash paid by by the Company when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity rather than an operating activity. Additionally, the Company has applied

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the provisions of this ASU on a prospective basis in the condensed consolidated statements of cash flows and prior periods have not been adjusted.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for the Company in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company has completed its initial impact assessment and is in the process of developing an implementation plan to include any potential process or system changes; however, the assessment of the impact to the Company’s results of operations, financial position and cash flows as a result of this guidance is ongoing. The Company will adopt this new standard as of January 1, 2018 and currently expects to apply the modified retrospective method, which may result in a cumulative effect adjustment as of the date of adoption. Both the Company’s initial assessment and its selected transition method may change depending on the results of the Company’s final assessment of the impact to its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice of how certain transactions are classified and presented in the statement of cash flows in accordance with ASC 230. The ASU amends or clarifies guidance on eight specific cash flow issues, some of which include classification on debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures, but the Company does not expect the new guidance to have a material impact.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

In March 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill (Step 2) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (as determined in Step 1). The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the new guidance to have a material impact on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of share-based equity awards must be accounted for as

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modifications. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award are not the same immediately before and after the modification. The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

Other recent accounting pronouncements issued by the FASB during 2016 and through the six months ended ended June 30, 2017 are not believed to have a material impact on the Company's present or historical consolidated financial statements.

NOTE 2 — BUSINESS ACQUISITIONS

Since its formation, the Company has consummated a number of transactions accounted for as business combinations as part of its growth strategy. The acquisitions of these businesses, which are in addition to periodic purchases of customer contracts, have allowed the Company to increase the scale at which it operates, which in turn affords the Company the ability to increase its operating leverage, extend its network, and broaden its customer base.

The accompanying condensed consolidated financial statements include the operations of the acquired entities from their respective acquisition dates. All of the acquisitions have been accounted for as a business combination. Accordingly, consideration paid by the Company to complete the acquisitions is initially allocated to the respective assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The recorded amounts for acquired assets and liabilities assumed are provisional and subject to change during the measurement period, which is up to 12 months from the date of acquisition.

In January 2017, the Company acquired Hibernia. The Company paid $529.6 million in cash consideration, of which $14.6 million was net cash acquired, and 3,329,872 unregistered shares of the Company's common stock, initially valued at $75.0 million on the date of announcement, and ultimately valued at $86.1 million at closing. The results of Hibernia have been included from January 1, 2017.

In June 2017, the Company acquired Perseus Telecom ("Perseus"). The Company paid $37.5 million in cash consideration and assumed $1.9 million in capital leases. $4.0 million of the initial cash consideration is held in escrow for one year, subject to reduction for any indemnification claims made by the Company prior to such date. The results of Perseus have been included from June 1, 2017.

The table below reflects the Company's provisional estimates of the acquisition date fair values of the assets acquired and liabilities assumed for its acquisitions over the six months endedJune 30, 2017 (amounts in thousands):

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Purchase Price	Hibernia			Perseus
Cash paid at closing, including working capital estimate	$	529,600		$	37,500
Common stock (1)	86,092			—
Purchase consideration	$	615,692		$	37,500
Purchase Price Allocation
Assets acquired:
Current assets	$	51,811		$	2,198
Property, plant and equipment	433,248			5,255
Other assets	359			—
Intangible assets - customer lists	166,740			22,500
Intangible assets - tradename	720			—
Intangible assets - other	6,800			—
Goodwill	186,228			23,375
Total assets acquired	845,906			53,328
Liabilities assumed:
Current liabilities	(40,749		)	(9,695		)
Capital leases, long-term portion	—			(1,906		)
Deferred revenue	(163,300		)	(1,248		)
Deferred tax liability	(26,165		)	(2,791		)
Other long-term liabilities	—			(188		)
Total liabilities assumed	(230,214		)	(15,828		)
Net assets acquired	$	615,692		$	37,500

(1) Common stock fair value equals the closing share price of $27.80 less a discount for lack of marketability

Intangible assets acquired related to the Hibernia acquisition include customer relationships, the Hibernia tradename, and various indefeasible right to use ("IRU") contracts. Intangible assets related to customer relationships, tradename, and IRUs are subject to straight-line amortization. The customer relationships have a weighted-average useful life of 10 years, the trademarks have a useful life of 2 years, and the IRUs have a useful life of 10 years.

Intangible assets acquired related to Perseus include customer relationships and are subject to straight-line amortization. The customer relationships have a weighted-average useful life of 8 years.

Amortization expense related to intangible assets created as a result of the Hibernia and Perseus acquisitions of $4.6 million and $9.1 million has been recorded for the three and six months ended June 30, 2017, respectively. Estimated amortization expense related to these for each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	10,263
2018	20,527
2019	20,167
2020	20,167
2021	20,167
2022 and beyond	96,379
Total	$	187,670

Goodwill in the amount of $186.2 million and $23.4 million was recorded as a result of the acquisitions of Hibernia and Perseus, respectively. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately

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recognized. The goodwill is not expected to be deductible for tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.

For material acquisitions completed during 2016, 2015, and 2014, please refer to Note 3 to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Acquisition Method Accounting Estimates

The Company initially recognizes the assets and liabilities acquired from the aforementioned acquisitions based on its preliminary estimates of their acquisition date fair values. As additional information becomes known concerning the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is no longer than a one year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

Transaction Costs

Transaction costs describe the broad category of costs the Company incurs in connection with signed and/or closed acquisitions. There are two types of costs that the Company accounts for:

•Severance, restructuring and other exit costs

•Transaction and integration costs

Severance, restructuring and other exit costs include severance and other one-time benefits for terminated employees; termination charges for leases and supplier contracts; and other costs incurred associated with an exit activity. These costs are reported separately in the condensed consolidated statements of operations during the three and six months ended June 30, 2017. Refer to Note 9 of these condensed consolidated financial statements for further information on severance, restructuring and other exit costs.

Transaction and integration costs include expenses associated with legal, accounting, regulatory and other transition services rendered in connection with acquisition, travel expense, and other non-recurring direct expenses associated with acquisitions. Transaction and integration costs are expensed as incurred in support of the integration. The Company incurred transaction and integration costs of $2.3 million and $1.1 million during the three months ended June 30, 2017 and 2016, respectively, and $10.4 million and $2.4 million during the six months endedJune 30, 2017 and 2016, respectively. Transaction and integration costs have been included in selling, general and administrative expenses in the condensed consolidated statements of operations and in cash flows from operating activities in the condensed consolidated statements of cash flows.

Pro forma Financial Information (Unaudited)

The pro forma results presented below include the effects of the Company's acquisitions during 2016 and 2017 as if the acquisitions had occurred on January 1, 2016. The pro forma net income (loss) for the three and six months ended June 30, 2017 and 2016, respectively, includes the additional depreciation and amortization resulting from the adjustments to the value of property, plant and equipment and intangible assets resulting from acquisition accounting and adjustment to amortized revenue during the first and second quarters of 2017 and 2016, respectively, as a result of the acquisition date valuation of assumed deferred revenue. The pro forma results also include interest expense associated with debt used to fund the acquisitions. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2016.

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	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
(Amounts in thousands, except per share and share data)
Revenue	$	191,350		$	181,106		$	381,572		$	360,298
Net loss	$	(650	)	$	(2,449	)	$	(15,619	)	$	(1,844	)
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Denominator for basic EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592
Denominator for diluted EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592

In June 2017, the Company entered into an agreement to acquire Global Capacity.  The purchase price will be $100.0 million in cash plus 1,850,000 shares of the Company's common stock. The acquisition is expected to close at the end of the quarter ending September 30, 2017.

NOTE 3 — GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $490.2 million and $280.6 million as of June 30, 2017 and December 31, 2016, respectively. Additionally, the Company's intangible asset balance was $395.5 million and $193.9 million as of June 30, 2017 and December 31, 2016, respectively. The additions to both goodwill and intangible assets during the six months ended June 30, 2017 relate to the acquisition of Hibernia and Perseus (see Note 2 - Business Acquisitions) and asset purchase of customer contracts.

The change in the carrying amount of goodwill for the six months endedJune 30, 2017 was as follows (amounts in thousands):

	Perseus		Hibernia			Prior Year Acquisitions		Total
Balance at December 31, 2016	$	—	$	—		$	280,593	$	280,593
Initial goodwill associated with current year business combinations	23,375		186,538			—		209,913
Adjustments to current year business combinations	—		(310		)	—		(310		)
Adjustments to prior year business combinations	—		—			—		—
Balance at June 30, 2017	$	23,375	$	186,228		$	280,593	$	490,196

The following table summarizes the Company’s intangible assets as of June 30, 2017 and December 31, 2016 (amounts in thousands):

		June 30, 2017						December 31, 2016
	Amortization Period	Gross Asset Cost		Accumulated Amortization		Net Book Value		Gross Asset Cost		Accumulated Amortization		Net Book Value
Customer contracts	3-10 years	$	501,150	$	121,876	$	379,274	$	267,755	$	91,136	$	176,619
Non-compete agreements	3-5 years	4,571		4,467		104		4,572		4,420		152
Point-to-point FCC license fees	3 years	1,697		1,556		141		1,695		1,268		427
Intellectual property	10 years	17,379		2,943		14,436		17,379		2,076		15,303
Trade name	3 years	3,812		2,295		1,517		3,092		1,657		1,435
		$	528,609	$	133,137	$	395,472	$	294,493	$	100,557	$	193,936

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Amortization expense was $16.6 million and $10.2 million for the three months ended June 30, 2017 and 2016, respectively, and $32.6 million and $19.4 million for the six months ended June 30, 2017 and 2016, respectively.

Estimated amortization expense related to intangible assets subject to amortization at June 30, 2017 in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	$	395,472

NOTE 4 — ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table summarizes the Company’s accrued expenses and other current liabilities as of June 30, 2017 and December 31, 2016 (amounts in thousands):

	June 30, 2017		December 31, 2016
Compensation and benefits	$	8,647	$	10,035
Selling, general and administrative	4,840		4,534
Carrier costs	9,838		13,543
Restructuring	7,332		3,247
Fiber pair repurchase	10,000		—
Other	13,929		5,529
	$	54,586	$	36,888

NOTE 5 — DEFERRED REVENUE

The total deferred revenue as of June 30, 2017 was $167.0 million, consisting of unamortized prepaid capacity sales, IRUs, deferred non-recurring revenue and unearned revenue for amounts billed in advance to customers. Deferred revenue is recognized as current and noncurrent deferred revenue on the condensed consolidated balance sheet.

Prepaid capacity sales and IRUs represent $132.5 million of the total deferred revenue balance as of June 30, 2017 and remaining amortization at June 30, 2017 and in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

	Capacity Sales and IRUs
2017 remaining	$	11,488
2018	15,656
2019	11,224
2020	10,894
2021	10,024
2022 and beyond	73,209
	$	132,495

NOTE 6     — DEBT

As of June 30, 2017 and December 31, 2016, long-term debt was as follows (amounts in thousands):

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	June 30, 2017			December 31, 2016
Term loan	$	696,500		$	425,775
7.875% Senior unsecured notes	450,000			300,000
Revolving line of credit	—			20,000
Total debt obligations	1,146,500			745,775
Unamortized debt issuance costs	(31,662		)	(9,310		)
Unamortized original issuance premium (discount), net	969			(6,957		)
Carrying value of debt	1,115,807			729,508
Less current portion	(7,000		)	(4,300		)
Long-term debt less current portion	$	1,108,807		$	725,208

2017 Credit Agreement

On January 9, 2017, the Company entered into a credit agreement (the "2017 Credit Agreement") that provides a $700.0 million term loan facility and a $75.0 million revolving line of credit facility (which includes a $25.0 million letter of credit facility). In addition, the Company may request incremental term loan and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $150.0 million and an unlimited amount that is subject to pro forma compliance with certain net secured leverage ratio tests provided, however, that incremental revolving loan commitments may not exceed $25.0 million. The term loan facility was issued at an original issuance discount of $3.5 million.

The maturity date of the term loan facility is January 9, 2024 and the maturity date of the revolving loan facility is January 9, 2022. The principal amount of the term loan facility is payable in equal quarterly installments of $1.8 million commencing on March 31, 2017 and continuing thereafter until the maturity date when the remaining balance of outstanding principal amount is payable in full. In addition to scheduled mandatory repayments, the Company is also required to repay an amount of up to 50% of Excess Cash Flow (as defined in the Credit Agreement). No such excess cash payments were made during the six months ended June 30, 2017.

The Company may prepay loans under the 2017 Credit Agreement at any time, subject to certain notice requirements and LIBOR breakage costs. If within six months after entering into the 2017 Credit Agreement certain prepayments are made or any amendment reduces the “effective yield” applicable to all or a portion of the term loan, such prepayment or repriced portions of the term loan will be subject to a penalty equal to 1.00% of the outstanding term loan being prepaid or repriced.

At the Company's election, the loans under the 2017 Credit Agreement may be made as either Base Rate Loans or Eurodollar Loans, with applicable margins at 3.00% for Base Rate Loans and 4.00% for Eurodollar Loans. The Eurodollar Loans are subject to a floor of 1.00%, and the applicable margin for revolving loans is 2.50% for Base Rate Loans and 3.50% for Eurodollar Loans. The effective interest rate on term loan at June 30, 2017 and December 31, 2016 was5.0% and 5.8%, respectively.

On July 10, 2017, the Company entered into Amendment No. 1 (the "Repricing Amendment") to the 2017 Credit Agreement. The Repricing Amendment, among other things, reduces the applicable margin on Tranche B Term Loans to 2.25% for Base Rate Loans and 3.25% for Eurodollar Loans, and reduces the applicable margin on Revolving Loans to 2.00% for Base Rate Loans and 3.00% for Eurodollar Loans.  The amendment also establishes a soft call protection of 1.0% through January 10, 2018 for certain prepayments, refinancings  and amendments.

The obligations under the Credit Agreement are secured by the substantial majority of the tangible and intangible assets of the Company and the guarantors.

The 2017 Credit Agreement does not contain a financial covenant for the term loan facility, but includes a maximum consolidated net secured leverage ratio applicable to the revolving credit facility in the event that utilization exceeds 30% of the revolving loan facility commitment.

The proceeds of the term loan facility were used to finance the Hibernia acquisition, refinance the Company's existing credit facility and to pay costs and expenses associated with such transactions.

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7.875% Senior Unsecured Notes

In December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of its 7.875% senior unsecured notes due in 2024 (the "Existing Notes"). The proceeds of the Existing Notes were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia in January 2017. The Company recognized the proceeds from the private offering as restricted cash and cash equivalents in its consolidated financial statements as of December 31, 2016. The funds were subsequently released with the closing of Hibernia. In connection with the offering, the Company incurred debt issuance costs of $9.7 million of which $0.5 million, was incurred in 2016 and the remainder was incurred in 2017.

In June 2017, the Company completed a private offering of $150.0 million aggregate principal amount of its 7.875% senior unsecured notes due in 2024 (the "New Notes"). The New Notes will be treated as a single series of debt securities with the Company's Existing Notes (together with the New Notes, the "Notes").  The New Notes have identical terms as the Existing Notes, other than the issue date and offering price. The New Notes were issued at a premium of $9.0 million. In connection with the offering, the Company incurred debt issuance costs of $2.9 million.

The aggregate contractual maturities of long-term debt (excluding unamortized debt issuance costs and unamortized OID) were as follows as of June 30, 2017 (amounts in thousands):

	Total debt
2017 remaining	$	3,500
2018	7,000
2019	7,000
2020	7,000
2021	7,000
2022 and beyond	1,115,000
	$	1,146,500

Debt Issuance Costs and Original Issuance Discounts and Premiums

In connection with the 2017 Credit Agreement and the Notes, the Company paid total new debt issuance costs of $24.8 million, of which $23.5 million qualified for deferral. $6.3 million of debt issuance costs were carried over from the prior term loan facility that qualified as a modification. These costs will be amortized to interest expense over the respective term of the underlying debt instruments using the effective interest method.

The unamortized balance of debt issuance costs as of June 30, 2017 and December 31, 2016 was $31.7 million and $9.3 million, respectively. Debt issuance costs are presented in the condensed consolidated balance sheets as a reduction to "Long-term debt." Interest expense associated with the amortization of debt issuance costs was $0.9 million and $0.4 million for the three months ended June 30, 2017 and 2016, respectively, and $1.6 million and $0.9 million for the six months endedJune 30, 2017 and 2016, respectively.

The term loan facility under the 2017 Credit Agreement was issued at an original issuance discount of $3.5 million. $5.0 million of the unamortized OID balance was carried over from the prior term loan facility that qualified as a modification. The total OID will be amortized to interest expense over the term of the term loan using the effective interest method. The New Notes were issued at a premium of $9.0 million. The total OID will be amortized to interest expense, net over the term of the New Notes using the effective interest method.

The unamortized balance of OID for the periods ended June 30, 2017 and December 31, 2016 was $1.0 million net premium and $7.0 million discount, respectively. OID is presented in the condensed consolidated balance sheets as a reduction to "Long-term debt." Interest expense, net associated with the amortization of OID was $0.2 million and $18 thousand for the three months ended June 30, 2017 and 2016, respectively, and $0.5 million and $0.3 million for the six months endedJune 30, 2017 and 2016, respectively.

The Company expensed an aggregate $5.7 million of debt issuance costs and OID that did not qualify for deferral as a Loss on Debt Extinguishment in the condensed consolidated statement of operations for the six months ended June 30, 2017.

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Previous Debt Agreement - October 2015 Credit Agreement

On October 22, 2015, the Company entered into a credit agreement (the “October 2015 Credit Agreement”) that provided for a $400.0 million term loan facility and a $50.0 million revolving line of credit (which includes a $15.0 million letter of credit facility and a $10.0 million swingline facility). As of December 31, 2016, the Company had drawn $20.0 million under the revolving line of credit and had $29.5 million of borrowing capacity available. Amounts outstanding under October 2015 Credit agreement were paid in full at the closing of the 2017 Credit Agreement. The previous term loan was issued at an OID of $8.0 million.

NOTE 7 — SHARE-BASED COMPENSATION

Share-Based Compensation Plan

The Company grants share-based equity awards, including stock options and restricted stock, under the GTT Stock Plan. The GTT Stock Plan is limited to an aggregate 9,500,000 shares of which 7,977,987 have been issued and are outstanding as of June 30, 2017.

The GTT Stock Plan permits the granting of time-based stock options, time-based restricted stock and performance-based restricted stock to employees and consultants of the Company, and non-employee directors of the Company.

Time-based options granted under the GTT Stock Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire no later than 10 years from the grant date. The Company uses the Black-Scholes option-pricing model to determine the fair value of its stock option awards at the time of grant. The stock options generally vest over four years with 25% of the options becoming exercisable one year from the date of grant and the remaining 75% annually or quarterly over the following three years.

Time-based restricted stock granted under the GTT Stock Plan is valued at the GTT closing stock price on the date of grant. Time-based restricted stock generally vests over four years with 25% of the shares becoming unrestricted one year from the date of grant and the remaining 75% annually or quarterly over the following three years.

Performance-based restricted stock is granted under the GTT Stock Plan subject to the achievement of certain performance measures. Once achievement of these performance measures is considered probable, the Company starts to expense the fair value of the grant over the vesting period. The performance-based restricted stock is valued at the closing price on the date of grant. The performance grant vests quarterly over the vesting period once achievement of the performance measure has been met and approved by the Compensation Committee.

The Compensation Committee of the Board of Directors, as administrator of the GTT Stock Plan, has the discretion to authorize a different vesting schedule for any awards.

Share-Based Compensation Expense

The following tables summarize the share-based compensation expense recognized as a component of selling, general and administrative expense in the condensed consolidated statements of operations (amounts in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Stock options	$	334	$	306	$	675	$	732
Restricted stock	4,929		4,194		9,136		5,320
ESPP	63		—		91		—
Total	$	5,326	$	4,500	$	9,902	$	6,052

As of June 30, 2017, there was $44.8 million of total unrecognized compensation cost related to unvested share-based compensation awards. The following table summarizes the unrecognized compensation cost and the weighted average period over which the cost is expected to be amortized (amounts in thousands):

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	June 30, 2017
	Unrecognized Compensation Cost		Weighted Average Remaining Period to be Recognized (Years)
Time-based stock options	$	2,680	1.86
Time-based restricted stock	29,167		2.58
Performance-based restricted stock	12,948		1.44
Total	$	44,795	2.21

The following tables summarize the stock options and restricted stock granted during the three and six months ended June 30, 2017 and 2016 (amounts in thousands, except shares data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Time-based stock options granted	—		11,000		—		155,958
Fair value of stock options granted	$	—	$	89	$	—	$	941
Time-based restricted stock granted	108,800		53,769		693,308		529,303
Fair value of time-based restricted stock granted	$	3,151	$	919	$	19,950	$	7,288

Performance-based Restricted Stock

The Company granted $8.5 million of restricted stock during 2014 and early 2015 contingent upon the achievement of certain performance criteria (the "2014 Performance Awards"). The fair value of the 2014 Performance Awards was calculated using the value of GTT common stock on the grant date. The Company started recognizing share-based compensation expense for these grants when the achievement of the performance criteria became probable, which was in the third quarter of 2015. The 2014 Performance Awards started vesting in the fourth quarter of 2015 when the performance criteria were met and they will continue to vest ratably through the third quarter of 2017. As of June 30, 2017, unamortized compensation cost related to the unvested 2014 Performance Awards was $0.1 million.

The Company granted $17.4 million of restricted stock during 2015 and 2017 contingent upon the achievement of certain performance criteria (the "2015 Performance Awards"). The fair value of the 2015 Performance Awards was calculated using the value of GTT common stock on the grant date. Upon announcement of the Hibernia acquisition in November 2016, the achievement of two of the four performance criteria became probable and the Company started recognizing share-based compensation expense for these grants. Expense recognition will continue through the fourth quarter of 2018. Additionally, upon announcement of the Global Capacity acquisition in June 2017, the achievement of the final two performance criteria became probable and the Company started recognizing share-based compensation expense for these grants. Expense recognition will continue through the first quarter of 2019. The Company recognized share-based compensation expense related to the 2015 Performance Awards of $1.7 million and $2.8 million for the three and six months ended June 30, 2017, respectively. No share-based compensation expense was recognized during the comparable 2016 period. As of June 30, 2017, unamortized compensation cost related to the unvested 2015 Performance Awards was $12.8 million.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("ESPP") that permits eligible employees to purchase common stock through payroll deductions at the lessor of the opening stock price or 85% of the closing stock price of the common stock during each of the three-month offering periods. The offering periods generally commence on the first day and the last day of each quarter. At June 30, 2017, 452,934 shares were available for issuance under the ESPP.

NOTE 8 — INCOME TAXES

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate, adjusted for the effect of discrete items arising in the quarter. Each quarter the Company update its estimate of the annual effective tax rate.

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The quarterly tax provision and the quarterly estimate of the Company's annual effective tax rate is subject to significant variation due to several factors, including variability in accurately predicting pre-tax and taxable income (loss) and the mix of jurisdictions to which they relate, effects of acquisitions and integrations, audit-related developments, changes in the Company's stock price, foreign currency gains (losses), and tax law developments. Additionally, the Company's effective tax rate may be more or less volatile based on the amount of pre-tax income or loss and impact of discrete items.

For the six months endedJune 30, 2017, the Company recorded a tax benefit of $14.1 million, which included $3.6 million of net discrete tax benefits primarily attributable to excess tax benefits from share-based compensation.

NOTE 9 — SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS

The Company incurred severance, restructuring and other exit costs associated with the acquisition of Hibernia and Perseus. These costs include employee severance costs, termination costs associated with facility leases and network agreements, and other exit costs related to the transactions.

The total exit costs recorded and paid relating to the acquisitions mentioned above are summarized as follows for the six months ended June 30, 2017 (amounts in thousands):

	Balance, December 31, 2016		Charges and Adjustments		Payments			Balance, June 30, 2017
Employee Termination Benefits	$	42	$	9,692	$	(5,714	)	$	4,020
Contract Terminations:
Lease terminations	859		500		(162		)	1,197
Other contract terminations	2,346		531		(762		)	2,115
	$	3,247	$	10,723	$	(6,638	)	$	7,332

The total exit costs recorded and paid relating to prior year acquisitions are summarized as follows for the six months ended June 30, 2016 (amounts in thousands):

	Balance, December 31, 2015		Charges and Adjustments		Payments			Balance, June 30, 2016
Employee Termination Benefits	$	1,903	$	870	$	(2,643	)	$	130
Contract Terminations:
Lease terminations	1,796		—		(741		)	1,055
Other contract terminations	3,035		625		(403		)	3,257
	$	6,734	$	1,495	$	(3,787	)	$	4,442

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Estimated annual commitments under contractual obligations are as follows at June 30, 2017 (amounts in thousands):

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	Network Supply		Office Space		Capital Leases		Other
2017 remaining	$	65,263	$	2,012	$	917	$	1,254
2018	90,337		4,144		1,277		326
2019	48,139		3,522		223		51
2020	15,018		2,877		—		—
2021	6,420		2,365		—		—
2022 and beyond	43,769		6,987		—		—
	$	268,946	$	21,907	$	2,417	$	1,631

Network Supply Agreements

As of June 30, 2017, the Company had purchase obligations of $268.9 million associated with the telecommunications services that the Company has contracted to purchase from its suppliers. The Company’s supplier agreements fall into two key categories, the Company's core network backbone and customer specific locations (also referred to as 'last mile' locations). Supplier agreements associated with the Company's core network backbone are typically contracted on a one-year term and do not relate to any specific underlying customer commitments. The short-term duration allows the Company to take advantage of favorable pricing trends.

Supplier agreements associated with the Company's customer specific locations, which represents the substantial majority of the Company's network spending are typically contracted so the terms and conditions in both the vendor and customer contracts are substantially the same in terms of duration and capacity. The back-to-back nature of the Company’s contracts means that its network supplier obligations are generally mirrored by its customers' commitments to purchase the services associated with those obligations.

Office Space and Leases

The Company is currently headquartered in McLean, Virginia and has 14 other offices throughout North America, seven offices in Europe, one office in India, one office in Hong Kong, and one office in Brazil. The Company records rent expense using the straight-line method over the term of the respective lease agreement. Office facility rent expense was $1.0 million and $0.9 million for the three months ended June 30, 2017 and 2016, respectively, and $2.1 million and $1.9 million for the six months endedJune 30, 2017 and 2016, respectively.

Legal Proceedings

From time to time, the Company is a party to legal proceedings arising in the normal course of its business. As of June 30, 2017, the Company does not believe that it is a party to any current or pending legal action that could reasonably be expected to have a material adverse effect on its financial condition or results of operations and cash flows. 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Report, as well as the consolidated financial statements and Management's Discussion and Analysis ("MD&A") of our Annual Report. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below. For a more complete description of the risks noted above and other risks that could cause our actual results to materially differ from our current expectations, please see Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which we refer to as our Annual Report. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Executive Summary

GTT Communications, Inc. is a provider of cloud networking services to multinational clients. We offer a broad portfolio of global services including: private networking services, Internet services, optical transport, managed networking and security services, voice and unified communication services, and video transport services.

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Our global Tier 1 IP network delivers connectivity for our clients around the world. We provide services to leading multinational enterprise, carrier, and government customers in over 100 countries. We strive to differentiate ourselves from our competition by delivering service to our clients with simplicity, speed, and agility.

We deliver six primary service offerings to our customers:

Private Networking Services

We provide Layer 2 (Ethernet) and Layer 3 (MPLS and IP-VPN) private networking solutions to meet the growing needs of multinational enterprises, carriers, service providers, and content delivery networks regardless of location. We design and implement custom private, public, and hybrid cloud network solutions for our customers, offering bandwidth speeds from 10 Mbps to 100 Gbps per port with burstable and aggregate bandwidth capabilities. All services are available on a protected basis with the ability to specify pre-configured alternate routes to minimize the impact of any network disruption.

Through GTT's private networking services, clients can securely connect to cloud service providers in data centers and exchanges around the world. Our Cloud Connect feature provides private, secure, pre-established connectivity to leading cloud service providers. Clients can connect to GTT in one location and have access to a broad cloud service provider ecosystem from anywhere in the world.

Internet Services

We offer domestic and multinational customers scalable, high-bandwidth global Internet connectivity and IP transit with guaranteed availability and packet delivery. Our Internet services offer flexible connectivity with multiple port interfaces including Fast Ethernet, Gigabit Ethernet, 10 Gigabit Ethernet, and 100 Gigabit Ethernet. We also offer broadband and wireless access services. We support a dual stack of IPv4 and IPv6 protocols, enabling the delivery of seamless IPv6 services alongside existing IPv4 services.

Optical Transport

We provide a full suite of optical transport services over a core fiber network, enabling cloud-based applications and the transport of high volume data between data centers, large enterprise office locations, and media hubs. Our native wavelength product is designed to deliver scalable high performance optical connectivity over a state-of-the-art dense wave division multiplexing ("DWDM") platform. Our service is differentiated based on unique network diversity and low latency connections between major financial and commercial centers in North America and Europe. Our clients for these services include Internet-based technology companies and OTTs, large banks, and other service providers requiring network infrastructure.

Additionally, we provide low latency services between the major financial centers and exchanges, tailored to meet the requirements of proprietary trading firms for the fastest connections. Our service provides the industry leading lowest latency performance of the Express transatlantic subsea cable connecting North America and Europe, which is wholly owned and operated by GTT.

Managed Services

We offer fully managed network services, including managed equipment, managed security services, and managed secure access, enabling customers to focus on their core business. These end-to-end services cover the design, procurement, implementation, monitoring, and maintenance of a customer’s network.

• Managed CPE. Managed CPE provides a turnkey solution for the end-to-end management of customer premise equipment, from premises through the core network. This includes the design, procurement, implementation, monitoring, and maintenance of equipment including routers, switches, servers, and Wi-Fi access points.

• Security Services. Our cloud-based and premises-based security services provide a comprehensive, multi-layered security solution that protects the network while meeting the most stringent security standards. Our Unified Threat Management (“UTM”) services include advanced firewall, intrusion detection, anti-virus, web filtering, and anti-spam. UTM services also cover a broad range of compliance requirements, offering customers Security-as-a-Service versions of managed logging, vulnerability scanning, and security information management that meet numerous security standards, including Payment Card Industry / Cardholder Information Security Program compliance.

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• Managed Secure Access. Our Managed Secure Access service provides clients of all sizes with secure remote access to their network applications from any device, anywhere, anytime from any authorized user. Managed Secure Access extends network reach, allowing trusted users to establish a secure data connection from any browser or device using Transport Layer Security to encrypt all traffic and protect the network from unauthorized users.

• Managed Software Defined Wide Area Networking (“SD-WAN”). Leveraging our success to date in delivering hybrid WAN services, GTT’s Managed SD-WAN service provides our clients with optimized application performance and cost-effective network expansion, as well as dynamic bandwidth management, and the ability to integrate cost-effective network technologies into the corporate WAN.  With a Tier 1 IP network, extensive connectivity to leading cloud service providers across 300+ global points of presence, and a broad portfolio of diverse last mile connectivity options to any location in the world, GTT is well positioned to deliver managed SD-WAN services.

Voice and Unified Communication Services

Our SIP Trunking service is an enterprise-built unified communications offering that integrates voice, video, and chat onto a single IP connection, driving efficiency and productivity organization-wide. Our Enterprise PBX service allows clients to eliminate traditional voice infrastructure with communication services delivered through the cloud. The offering includes fully hosted and hybrid models for maximum flexibility.

Video Transport

We provide a suite of fully-managed video transport services. Our services are designed to support our clients' requirements for stringent broadcast quality, providing 100% quality of service for transmission of live events, sports entertainment, and news. Our service options include Dedicated, Occasional Use, and IP Video. We manage individual services, multicast distribution, and entire client networks, supporting all forms of signal management required for today's media workflow. GTT's video transport services are based on the core principle of "any signal, any format, anywhere." Our clients include many of the world's top broadcasters and cable programming providers.

Customer & Network Contracts

Our customer contracts generally range from one to five years or more for the initial term. Following the initial term, these agreements typically provide for automatic renewal for specified periods ranging from one month to one year. Our prices are fixed for the duration of the contract, and we typically bill monthly in advance for such services. If a customer terminates its agreement, the terms of our customer contracts typically require full recovery of any amounts due for the remainder of the term or, at a minimum, our liability to any underlying suppliers.

Our revenue is composed of three primary categories that include recurring revenue, non-recurring revenue, and usage revenue. Recurring revenue relates to contracted ongoing service that is generally fixed in price and paid by the customer on a monthly basis for the contracted term. For the six months endedJune 30, 2017, recurring revenue was approximately 93% of our total revenue. Non-recurring revenue primarily includes the amortization of previously collected installation and equipment charges to customers, and one-time termination charges for customers who cancel their services prior to the contract termination date. Usage revenue represents variable revenue based on whether a customer exceeds its committed usage threshold as specified in the contract.

Our network supplier contracts do not have any market related net settlement provisions. We have not entered into, and do not plan to enter into, any supplier contracts which involve financial or derivative instruments. The supplier contracts are entered into solely for the direct purchase of telecommunications capacity, which is resold by us in the normal course of business.

Other than cost of telecommunication services provided, our most significant operating expenses are employment costs. As of June 30, 2017, we had 879 full-time equivalent employees. For the six months endedJune 30, 2017, the total employee cash compensation and benefits represented approximately 14% of total revenue.

Recent Developments Affecting Our Results

Business Acquisitions

Since our formation, we have consummated a number of transactions accounted for as business combinations which were executed as part of our strategy of expanding through acquisitions. These acquisitions, which are in addition to our periodic purchases of customer contracts, have allowed us to increase the scale at which we operate which in turn affords us the ability to increase our

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operating leverage, extend our network, and broaden our customer base. The accompanying condensed consolidated financial statements include the operations of the acquired entities from their respective acquisition dates.

Hibernia

In January 2017, we acquired Hibernia Networks ("Hibernia") for $529.6 million in cash consideration, of which $14.6 million was net cash acquired, and 3,329,872 unregistered shares of our common stock. The results of Hibernia have been included from January 1, 2017.

Perseus

In June 2017, we acquired Perseus Telecom ("Perseus") for $37.5 million in cash consideration and the assumption of approximately $1.9 million in capital leases. The results of Perseus have been included from June 1, 2017.

Global Capacity

In June 2017, the Company entered into an agreement to acquire Global Capacity.  The purchase price will be $100.0 million in cash plus 1,850,000 shares of the Company's common stock. The acquisition is expected to close at the end of the quarter ending September 30, 2017.

Asset Purchases

Periodically we acquire customer contracts that we account for as an asset purchase and record a corresponding intangible asset that is amortized over its assumed useful life. During the six months endedJune 30, 2017, we acquired customer contracts for an aggregate purchase price of $37.3 million, of which $14.9 million was paid during the six months ended June 30, 2017 at the acquisitions' respective closing dates. The remaining $22.4 million is expected to be paid in 2017 and 2018, subject to any indemnification claims made through the final payment date. During 2016, we acquired customer contracts for an aggregate purchase price of $41.3 million, of which $20.0 million was paid in 2016 at the respective closing dates, of which $6.0 million was paid during the six months ended June 30, 2016. Of the remaining $21.3 million, $18.0 million was paid during the six months ended June 30, 2017 and the remaining $3.3 million is expected to be paid in the remainder of 2017, subject to any indemnification claims made through the final payment dates.

Indebtedness

The following summarizes our long-term debt at June 30, 2017 and December 31, 2016 (amounts in thousands):

	June 30, 2017			December 31, 2016
Term loan	$	696,500		$	425,775
7.875% Senior unsecured notes	450,000			300,000
Revolving line of credit	—			20,000
Total debt obligations	1,146,500			745,775
Unamortized debt issuance costs	(31,662		)	(9,310		)
Unamortized original issuance premium (discount), net	969			(6,957		)
Carrying value of debt	1,115,807			729,508
Less current portion	(7,000		)	(4,300		)
	$	1,108,807		$	725,208

2017 Credit Agreement

In January 2017, we entered into a credit agreement (the "2017 Credit Agreement") that provides a $700.0 million term loan facility and a $75.0 million revolving line of credit facility (which includes a $25.0 million letter of credit facility). In addition, we may request incremental term loan and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $150.0 million and an unlimited amount that is subject to pro forma compliance with certain net secured leverage ratio tests provided, however, that incremental revolving loan commitments may not exceed $25.0 million.

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The maturity date of the term loan facility is January 2024 and the maturity date of the revolving loan facility is January 2022. The principal amount of the term loan facility is payable in equal quarterly installments of $1.8 million, commencing on March 31, 2017 and continuing thereafter until the maturity date, when the remaining balance of outstanding principal amount is payable in full. In addition to scheduled mandatory repayments, the Company is also required to repay an amount of up to 50% of Excess Cash Flow (as defined in the Credit Agreement). No such excess cash payments were made during the six months ended June 30, 2017.

We may prepay loans under the 2017 Credit Agreement at any time, subject to certain notice requirements and LIBOR breakage costs. If within six months after entering into the 2017 Credit Agreement certain prepayments are made or any amendment reduces the “effective yield” applicable to all or a portion of the term loan, such prepayment or repriced portions of the term loan will be subject to a penalty equal to 1.00% of the outstanding term loan being prepaid or repriced.

At our election, the loans under the 2017 Credit Agreement may be made as either Base Rate Loans or Eurodollar Loans, with applicable margins at 3.00% for Base Rate Loans and 4.00% for Eurodollar Loans. The Eurodollar Loans are subject to a floor of 1.00%, and the applicable margin for revolving loans is 2.50% for Base Rate Loans and 3.50% for Eurodollar Loans. The obligations under the 2017 Credit Agreement are secured by the substantial majority of our tangible and intangible assets.

In July 2017, we entered into Amendment No. 1 (the "Repricing Amendment") to the 2017 Credit Agreement. The Repricing Amendment, among other things, reduces the applicable margin on Tranche B Term Loans to 2.25% for Base Rate Loans and 3.25% for Eurodollar Loans, and reduces the applicable margin on Revolving Loans to 2.00% for Base Rate Loans and 3.00% for Eurodollar Loans.  The amendment also establishes a soft call protection of 1.0% through January 10, 2018 for certain prepayments, refinancings  and amendments.

The 2017 Credit Agreement does not contain a financial covenant for the term loan facility, but includes a maximum consolidated net secured leverage ratio applicable to the revolving credit facility in the event that utilization exceeds 30% of the revolving loan facility commitment.

7.875% Senior Unsecured Notes

In December 2016 we completed a private offering of $300.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024 (the "Notes"). The proceeds of the Notes were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia in January 2017. We recognized the proceeds from the private offering as restricted cash and cash equivalents in our consolidated financial statements as of December 31, 2016, which were subsequently released with the closing of Hibernia. In connection with the offering, we incurred debt issuance costs of $9.7 million, of which $0.5 million was incurred in 2016 and the remainder was incurred in 2017.

In June 2017, we completed a private offering of $150.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024 (the "New Notes"). The New Notes will be treated as a single series of debt securities with the Company's Existing Notes (together with the New Notes, the "Notes").  The New Notes have identical terms as the Existing Notes, other than the issue date and offering price. The New Notes were issued at a premium of $9.0 million. In connection with the offering, we incurred debt issuance costs of $2.9 million.

Previous Debt Agreement

In October 2015, we entered into the October 2015 Credit Agreement, which provided for a $400.0 million term loan facility and a $50.0 million revolving line of credit facility (which included a $15.0 million letter of credit facility and a $10.0 million swingline facility). As of December 31, 2016, we had drawn $20.0 million under the revolving line of credit and had $29.5 million of available borrowing capacity. Amounts outstanding under the October 2015 Credit Agreement were repaid in full in connection with the 2017 Credit Agreement. The previous term loan was issued at an OID of $8.0 million.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. For information regarding our critical accounting policies and estimates, please refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates" contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Note 1 to our consolidated financial statements contained therein. There have been no material changes to the critical accounting policies previously disclosed in that report.

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Results of Operations

Three months ended June 30, 2017 compared to three months ended June 30, 2016

Overview. The financial information presented in the tables below is comprised of the unaudited condensed consolidated financial information for the three months ended June 30, 2017 and 2016 (amounts in thousands):

	Three Months Ended June 30,
	2017			2016			$ Variance			% Change
Revenue:
Telecommunications services	$	186,216		$	128,914		$	57,302		44.4	%
Operating expenses:
Cost of telecommunications services	93,418			68,272			25,146			36.8	%
Selling, general and administrative expenses	46,696			35,940			10,756			29.9	%
Severance, restructuring and other exit costs	52			—			52			100.0	%
Depreciation and amortization	31,463			15,661			15,802			100.9	%
Total operating expenses	171,629			119,873			51,756			43.2	%
Operating income	14,587			9,041			5,546			61.3	%
Other expense:
Interest expense, net	(16,623		)	(7,125		)	(9,498		)	133.3	%
Loss on debt extinguishment	—			(1,632		)	1,632			*
Other expense, net	70			(188		)	258			(137.2	)%
Total other expense	(16,553		)	(8,945		)	(7,608		)	85.1	%
(Loss) income before income taxes	(1,966		)	96			(2,062		)	(2,147.9	)%
(Benefit from) provision for income taxes	(2,615		)	5			(2,620		)	*
Net income (loss)	$	649		$	91		$	558		613.2	%
* - Not meaningful

Revenue

Our revenue increased by $57.3 million, or 44.4%, from $128.9 million for the three months ended June 30, 2016 to $186.2 million for the three months ended June 30, 2017. The increase was primarily due to the acquisition of Hibernia, as well as rep-driven growth and certain small acquisitions.

On a constant currency basis using the average exchange rates in effect during the three months ended June 30, 2016 revenue would have been higher by $3.0 million for the three months ended June 30, 2017.

Cost of Telecommunications Services Provided

Cost of telecommunications services provided increased by $25.1 million, or 36.8%, from $68.3 million for the three months ended June 30, 2016 to $93.4 million for the three months ended June 30, 2017. Consistent with our increase in revenue, the increase in cost of telecommunications services provided was principally driven by the acquisition of Hibernia, as well as rep-driven growth and the purchase of certain customer contracts.

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On a constant currency basis using the average exchange rates in effect during the three months ended June 30, 2016, cost of telecommunications services provided would have been higher by $1.3 million for the three months ended June 30, 2017.

Operating Expenses

Selling, General and Administrative Expenses. SG&A expenses increased by $10.8 million, or 29.9%, from $35.9 million for the three months ended June 30, 2016 to $46.7 million for the three months ended June 30, 2017. The following table summarizes the major categories of selling, general and administrative expenses for the three months ended June 30, 2017 and 2016 (amounts in thousands):

	Three Months Ended June 30,
	2017		2016		$ Variance		% Change
Employee related compensation (excluding share-based compensation)	$	25,803	$	20,165	$	5,638	28.0	%
Share-based compensation	5,326		4,500		826		18.4	%
Transaction and integration expense	2,342		1,062		1,280		120.5	%
Other SG&A(1)	13,225		10,213		3,012		29.5	%
Total	$	46,696	$	35,940	$	10,756	29.9	%

⁽¹⁾ Includes professional fees, marketing costs, facilities and other general support costs.

Employee related compensation increased primarily due to the Hibernia acquisition. Share-based compensation expense increases were driven by the recognition of share-based compensation for performance awards and an increase in the aggregate value of employee equity awards. Transaction and integration costs increases were driven by final integration costs related to Hibernia and transaction costs associated with the acquisition of Perseus. Other SG&A expense increases were principally driven by the acquisition of Hibernia.

Severance, Restructuring and Other Exit Costs. For the three months ended June 30, 2017, we incurred restructuring charges of $0.1 million relating to the Hibernia acquisition. There were no charges incurred during the three months ended June 30, 2016.

Depreciation and Amortization. Amortization of intangible assets increased $6.4 million or 62.9%, from $10.2 million to $16.6 million for the three months ended June 30, 2017, due to the additional definite-lived intangible assets recorded in the Hibernia acquisitions. Depreciation expense increased $9.4 million, or 171.2%from $5.5 million to $14.9 million for the three months ended June 30, 2017, primarily due to the assets acquired from the Hibernia acquisition.

Other Expense. Other expense increased by $7.6 million to $16.6 million for the three months ended June 30, 2017 compared to the three months ended June 30, 2016. This is primarily attributed to higher interest expense due to higher debt levels driven by the Hibernia acquisition.

On a constant currency basis using the average exchange rates in effect during the three months ended June 30, 2016, operating expenses would have been higher by $0.5 million for the three months ended June 30, 2017. Selling, general and administrative expenses are the only operating expenses that would have been impacted by the change in exchange rates.

Six months ended June 30, 2017 compared to six months ended June 30, 2016

Overview. The financial information presented in the tables below is comprised of the unaudited condensed consolidated financial information for the six months endedJune 30, 2017 and 2016 (amounts in thousands):

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	Six Months Ended June 30,
	2017			2016			$ Variance			% Change
Revenue:
Telecommunications services	$	368,580		$	253,350		$	115,230		45.5	%
Operating expenses:
Cost of telecommunications services	184,787			134,469			50,318			37.4	%
Selling, general and administrative expenses	99,628			68,134			31,494			46.2	%
Severance, restructuring and other exit costs	10,723			1,495			9,228			617.3	%
Depreciation and amortization	61,823			31,260			30,563			97.8	%
Total operating expenses	356,961			235,358			121,603			51.7	%
Operating income	11,619			17,992			(6,373		)	(35.4	)%
Other expense:
Interest expense, net	(32,455		)	(14,497		)	(17,958		)	123.9	%
Loss on debt extinguishment	(5,659		)	(1,632		)	(4,027		)	246.8	%
Other expense, net	(38		)	(467		)	429			(91.9	)%
Total other expense	(38,152		)	(16,596		)	(21,556		)	129.9	%
(Loss) income before income taxes	(26,533		)	1,396			(27,929		)	(2,000.6	)%
(Benefit from) provision for income taxes	(14,071		)	409			(14,480		)	(3,540.3	)%
Net income (loss)	$	(12,462	)	$	987		$	(13,449	)	(1,362.6	)%
* - Not meaningful

Revenue

Our revenue increased by $115.2 million, or 45.5%, from $253.4 million for the six months ended June 30, 2016 to $368.6 million for the six months ended June 30, 2017. The increase was primarily due to the acquisition of Hibernia, as well as rep-driven growth and the purchase of certain customer contracts.

On a constant currency basis using the average exchange rates in effect during the six months ended June 30, 2016 revenue would have been higher by $6.1 million for the six months ended June 30, 2017.

Cost of Telecommunications Services Provided

Cost of telecommunications services provided increased by $50.3 million, or 37.4%, from $134.5 million for the six months ended June 30, 2016 to $184.8 million for the six months ended June 30, 2017. Consistent with our increase in revenue, the increase in cost of telecommunications services provided was principally driven by the acquisition of Hibernia, as well as rep-driven growth and the purchase of certain customer contracts.

On a constant currency basis using the average exchange rates in effect during the six months ended June 30, 2016, cost of telecommunications services provided would have been higher by $2.7 million for the six months ended June 30, 2017.

Operating Expenses

Selling, General and Administrative Expenses. SG&A expenses increased by $31.5 million, or 46.2%, from $68.1 million for the six months ended June 30, 2016 to $99.6 million for the six months ended June 30, 2017. The following table summarizes the

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major categories of selling, general and administrative expenses for the six months endedJune 30, 2017 and 2016 (amounts in thousands):

	Six Months Ended June 30,
	2017		2016		$ Variance		% Change
Employee related compensation (excluding share-based compensation)	$	53,075	$	40,365	$	12,710	31.5	%
Share-based compensation	9,902		6,052		3,850		63.6	%
Transaction and integration expense	10,427		2,323		8,104		348.9	%
Other SG&A(1)	26,224		19,394		6,830		35.2	%
Total	$	99,628	$	68,134	$	31,494	46.2	%

⁽¹⁾ Includes professional fees, marketing costs, facilities and other general support costs.

Employee related compensation increased primarily due to the Hibernia acquisition. Share-based compensation expense increases were driven by the recognition of share-based compensation for performance awards and an increase in the aggregate value of employee equity awards. Transaction and integration costs increases were driven by final integration costs related to Hibernia and transaction costs associated with the acquisition of Perseus. Other SG&A expense increases were principally driven by the acquisition of Hibernia.

Severance, Restructuring and Other Exit Costs. For the six months ended June 30, 2017, we incurred restructuring charges of $10.7 million relating to the Hibernia acquisition. We incurred $1.5 million related to the acquisition of Telnes for the six months ended June 30, 2016.

Depreciation and Amortization. Amortization of intangible assets increased $13.2 million or 68.0%, from $19.4 million for the six months ended June 30, 2016 to $32.6 million for the six months ended June 30, 2017, due to the additional definite-lived intangible assets recorded in the Hibernia acquisitions. Depreciation expense increased $17.4 million, or 146.5%from $11.9 million to $29.3 million for the six months ended June 30, 2017, primarily due to the assets acquired from the Hibernia acquisition.

Other Expense. Other expense increased by $21.6 million to $38.2 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016. This is primarily attributed to higher interest expense due to higher debt levels driven by the Hibernia acquisition.

On a constant currency basis using the average exchange rates in effect during the six months ended June 30, 2016, operating expenses would have been higher by $1.0 million for the six months ended June 30, 2017. Selling, general and administrative expenses are the only operating expenses that would have been impacted by the change in exchange rates.

Liquidity and Capital Resources

Our primary sources of liquidity have been cash provided by operations, equity offerings, and debt financings. Our principal uses of cash have been for acquisitions, working capital, capital expenditures, and debt service requirements. We anticipate that our principal uses of cash in the future will be for acquisitions, capital expenditures, working capital, and debt service.

Management monitors cash flow and liquidity requirements on a regular basis, including an analysis of the anticipated working capital requirements for the next 12 months. This analysis assumes our ability to manage expenses, capital expenditures, indebtedness, and the anticipated growth of revenue. If our operating performance differs significantly from our forecasts, we may be required to reduce our operating expenses and curtail capital spending, and we may not remain in compliance with our debt covenants. In addition, if we are unable to fully fund our cash requirements through operations and current cash on hand, we may need to obtain additional financing through a combination of equity and debt financings and/or renegotiation of terms of our existing debt. If any such activities become necessary, there can be no assurance that we would be successful in obtaining additional financing or modifying our existing debt terms.

As of June 30, 2017, we had approximately $130.7 million in cash and cash equivalents, and our current liabilities were $153.5 million, including $17.8 million of earn-outs and holdback obligations, $7.3 million of accrued severance and exit costs, $19.3 million of deferred revenue associated with prior period capacity sales we acquired from Hibernia, and $23.9 million of unearned revenue for amounts billed in advance to customers. We believe that cash currently on hand, expected cash flows from future operations and existing borrowing capacity are sufficient to fund operations for at least the next 12 months.

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Our capital expenditures increased by $5.5 million, or 44.5% from $12.3 million for the six months ended June 30, 2016 to $17.8 million for the six months ended June 30, 2017. The increase in capital expenditures was due to our growth and the acquisition of Hibernia. We anticipate that we will incur capital expenditures in the range of 5% to 6% of revenue for 2017. We continue to expect that our capital expenditures will be primarily success-based, i.e., in support of specific revenue opportunities.

Cash Flows

We believe that our cash flows from operating activities, in addition to cash on-hand, will be sufficient to fund our operating activities and capital expenditures for the forseeable future, and in any event for at least the next 12 to 18 months. However, no assurance can be given that this will be the case.

The following table summarizes the components of our cash flows for the six months ended June 30, 2017 and 2016 (amounts in thousands):

Condensed Consolidated Statements of Cash Flows	Six Months Ended June 30,
	2017			2016
Net cash provided by operating activities	$	26,261		$	19,356
Net cash used in investing activities	(280,929		)	(32,039		)
Net cash provided by financing activities	356,180			15,060

Cash Provided by Operating Activities

Our largest source of cash provided by operating activities is monthly recurring revenue from our customers. Our primary uses of cash are payments to network suppliers, compensation related costs, and third-party vendors such as agents, contractors, and professional service providers.

Net cash flows from operating activities increased by $6.9 million, from $19.4 million for the six months ended June 30, 2016 to $26.3 million for the six months ended June 30, 2017. This increase was primarily due to the acquisition of Hibernia and rep-driven growth partially offset by non-recurring cash payments of $6.6 million for severance and exit costs, and $10.1 million for transaction and integration costs.

Cash Used in Investing Activities

Our primary uses of cash include acquisitions, purchases of customer contracts and capital expenditures.

Net cash flows used in investing activities increased by $248.9 million, from $32.0 million for the six months ended June 30, 2016 to $280.9 million for the six months ended June 30, 2017.

Cash used for the six months ended June 30, 2017 primarily consisted of $552.5 million for the Hibernia and Perseus acquisitions as well as certain customer contract purchases for which we paid $14.9 million, and capital expenditures of approximately $17.8 million.

Cash Provided by Financing Activities

Our primary source of cash for financing activities is debt financing proceeds. Our primary use of cash for financing activities is the refinancing of our debt and repayment of principal pursuant to the debt agreements.

Net cash flows from financing activities increased by $341.1 million, from $15.1 million for the six months ended June 30, 2016 to $356.2 million for the six months ended June 30, 2017, consisting primarily of net proceeds from the term loan and issuance of senior notes to fund the Hibernia and Perseus acquisitions.

Off-Balance Sheet Arrangements, Contractual Obligations and Commitments

The following table summarizes our significant contractual obligations as of June 30, 2017 (amounts in thousands):

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	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Term loan	$	696,500	$	7,000	$	14,000	$	14,000	$	661,500
7.875% Senior unsecured note	450,000		—		—		—		450,000
Operating leases	21,907		2,012		7,666		5,242		6,987
Capital leases	2,417		1,648		769		—		—
Network supplier agreements	268,946		65,263		138,476		21,438		43,769
Other	1,631		1,254		377		—		—
	$	1,441,401	$	77,177	$	161,288	$	40,680	$	1,162,256

As of June 30, 2017, we did not have any off-balance sheet arrangements.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), from time to time we may use or publicly disclose certain "non-GAAP financial measures" in the course of our financial presentations, earnings releases, earnings conference calls, and otherwise. For these purposes, the U.S. Securities and Exchange Commission (“SEC”) defines a "non-GAAP financial measure" as a numerical measure of historical or future financial performance, financial positions, or cash flows that (i) exclude amounts, or is subject to adjustments that effectively exclude amounts, included in the most directly comparable measure calculated and presented in accordance with GAAP in financial statements, and (ii) include amounts, or is subject to adjustments that effectively include amounts, that are excluded from the most directly comparable measure so calculated and presented.

Non-GAAP financial measures are provided as additional information to investors to provide an alternative method for assessing our financial condition and operating results. We believe that these non-GAAP measures, when taken together with our GAAP financial measures, allow us and our investors to better evaluate our performance and profitability. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. These measures should be used in addition to and in conjunction with results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures.

Pursuant to the requirements of Regulation G, whenever we refer to a non-GAAP financial measure we will also generally present the most directly comparable financial measure calculated and presented in accordance with GAAP, along with a reconciliation of the differences between the non-GAAP financial measure we reference with such comparable GAAP financial measure.

Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)

Adjusted EBITDA is defined by us as income/(loss) before interest, income taxes, depreciation and amortization ("EBITDA") adjusted to exclude severance, restructuring and other exit costs, acquisition-related transaction and integration costs, losses on extinguishment of debt, share-based compensation, and from time to time, other non-cash or non-recurring items.

We use Adjusted EBITDA to evaluate operating performance, and this financial measure is among the primary measures we use for planning and forecasting future periods. We further believe that the presentation of Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by management and makes it easier to compare our results with the results of other companies that have different financing and capital structures. The 2017 Credit Agreement does not contain a financial covenant for the term loan facility, but includes a maximum consolidated net secured leverage ratio that utilizes a modified EBITDA calculation. The modified EBITDA calculation is similar to our definition of Adjusted EBITDA; however it includes the pro forma Adjusted EBITDA of and expected cost synergies from the companies acquired by us during the applicable reporting period. Finally, Adjusted EBITDA results, along with other quantitative and qualitative information, are utilized by management and our compensation committee for purposes of determining bonus payouts to our employees.

Adjusted EBITDA Less Capital Expenditures

Adjusted EBITDA less purchases of property and equipment, which we also refer to as capital expenditures or capex, is a performance measure that we use to evaluate the appropriate level of capital expenditures needed to support our expected revenue,

37

and to provide a comparable view of our performance relative to other telecommunications companies who may utilize different strategies for providing access to fiber-based services and related infrastructure. We use a “capex light” strategy, which means we purchase fiber-based services and related infrastructure from other providers on an as-needed basis, pursuant to our customers’ requirements. Many other telecommunications companies spend significant amounts of capital expenditures to construct their own fiber networks and data centers, and attempt to purchase as little as possible from other providers. As a result of our strategy, we typically have lower Adjusted EBITDA margins compared to other providers, but also spend much less on capital expenditures relative to our revenue. We believe it is important to take both of these factors into account when evaluating our performance.

The following is a reconciliation of Adjusted EBITDA and Adjusted EBITDA less Capital Expenditures from Net income (loss):

	Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in thousands)	2017			2016			2017			2016
Adjusted EBITDA
Net income (loss)	$	649		$	91		$	(12,462	)	$	987
(Benefit from) provision for income taxes	(2,615		)	5			(14,071		)	409
Interest and other expense, net	16,553			7,313			32,493			14,964
Loss on debt extinguishment	—			1,632			5,659			1,632
Depreciation and amortization	31,463			15,661			61,823			31,260
Severance, restructuring and other exit costs	52			—			10,723			1,495
Transaction and integration costs	2,342			1,062			10,427			2,323
Share-based compensation	5,326			4,500			9,902			6,052
Adjusted EBITDA	53,770			30,264			104,494			59,122
Purchases of property and equipment	(9,281		)	(4,770		)	(17,752		)	(12,288		)
Adjusted EBITDA less capital expenditures	$	44,489		$	25,494		$	86,742		$	46,834

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain market risks. These risks, which include interest rate risk and foreign currency exchange risk, arise in the normal course of business rather than from trading activities.

Interest Rate Sensitivity

Our exposure to market risk for changes in interest rates is primarily related to our outstanding term loans and revolving loans. As of June 30, 2017, we had $696.5 million in term loans and no revolving loans. The interest expense associated with our term loan and revolving loan will vary with market rates.

For purposes of the following hypothetical calculations, we have used the 2017 Credit Agreement, which carries an interest rate equal to either Base Rate Loans with applicable margin at 3.0% or Eurodollar Loans at 4.0%, subject to a floor of 1.0%. Based on current rates, a hypothetical 100 basis point increase in Eurodollar rate would increase annual interest expense by approximately $7.1 million, which would decrease our income and cash flows by the same amount. A hypothetical increase of the Eurodollar rate to 4%, the average historical three-month rate, would increase annual interest expense by approximately $18.9 million, which would decrease our income and cash flows by the same amount.

We do not currently use derivative financial instruments and have not entered into any interest rate hedging transactions, but we may do so in the future.

Exchange Rate Sensitivity

Our exposure to market risk for changes in foreign currency rate relates to our global operations. Our consolidated financial statements are denominated in U.S. Dollars, but a portion of our revenue, cost of telecommunications services provided and selling, general and administrative expenses are recorded in the local currency of our foreign subsidiaries. Accordingly, changes in exchange

38

rates between the applicable foreign currency and the U.S. Dollar will affect the translation of each foreign subsidiary’s financial results into U.S. Dollars for purposes of reporting consolidated financial results.

Approximately 17% of our revenues for the three months ended June 30, 2017 were generated by non-US entities, of which approximately 12% was recorded in GBP, approximately 3% was recorded in Euros and the remainder was recorded predominantly in Canadian dollars. Approximately 19% of our cost of telecommunications services provided and approximately 15% of our selling, general and administrative expenses for the three months ended June 30, 2017 were generated by the same non-US entities. Therefore, it is highly unlikely that changes in exchange rates would have a material impact on our financial condition or results of operations.

We do not currently use derivative financial instruments and have not entered into any foreign currency hedging transactions, but we may do so in the future.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management carried out an evaluation required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision of and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15 and 15d-15 under the Exchange Act (“Disclosure Controls”).

Based on our evaluation, our CEO and CFO concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Our evaluation excluded Hibernia which was acquired in January 2017. On a pro forma basis, as of and for the three months ended December 31, 2016 Hibernia represented approximately 38% of total assets and 23% of total revenue. These percentages did not differ significantly for the six months post acquisition. In accordance with guidance issued by the SEC, companies are allowed to exclude acquisitions from their assessment of internal controls over financial reporting during the first year subsequent to the acquisition while integrating the acquired operations.

The CEO and the CFO, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures as of June 30, 2017, and based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) as of June 30, 2017, that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings arising in the normal course of business. We do not believe that we are party to any current or pending legal action that could reasonably be expected to have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC on March 9, 2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein:

Exhibit
Number	Description of Document
10.1	Amendment No. 1, dated as of July 10, 2017, among GTT Communications, Inc., a Delaware corporation, as the borrower, the lenders party thereto, and KeyBank National Association, as the administrative agent and as the Additional Tranche B Term Loan Lender (previously filed as an exhibit to the Registrant's Current Report on Form 8-K filed July 14, 2017, and incorporated herein by reference).
31.1*	Certification of Chief Executive Officer of the Registrant, pursuant to Rules 13a-14(a) of the Securities Exchange Act of 1934.
31.2*	Certification of Chief Financial Officer of the Registrant, pursuant to Rules 13a-14(a) of the Securities Exchange Act of 1934.
32.1*	Certification of Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	The following financial statements and footnotes from GTT Communications, Inc.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited); (ii) Condensed Consolidated Statements of Operations (unaudited); (iii) Condensed Consolidated Statements of Comprehensive Income (Loss); (iv) Condensed Consolidated Statement of Stockholders' Equity (unaudited); (v) Condensed Consolidated Statements of Cash Flows (unaudited); and (v) Notes to Condensed Consolidated Financial Statements.

*	Filed herewith
+	Denotes a management or compensatory plan or arrangement

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		GTT Communications, Inc.
		By:	/s/ Richard D. Calder, Jr.
			Richard D. Calder, Jr.
			President, Chief Executive Officer and
			Director (Principal Executive Officer)
		By:	/s/ Michael T. Sicoli
			Michael T. Sicoli
			Chief Financial Officer
			(Principal Financial Officer)
		By:	/s/ Daniel M. Fraser
			Daniel M. Fraser
			Vice President and Controller
Date:	August 4, 2017		(Principal Accounting Officer)

42

EX-31.12

  Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard D. Calder, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of GTT Communications, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 4, 2017	/s/ Richard D. Calder, Jr.
		Richard D. Calder, Jr.
		President, Chief Executive Officer and Director

EX-31.22

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

     I, Michael T. Sicoli, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of GTT Communications, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

     5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 4, 2017	/s/ Michael T. Sicoli
		Michael T. Sicoli
		Chief Financial Officer

EX-32.12

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of GTT Communications, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard D. Calder, Jr., Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my best knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 4, 2017	/s/ Richard D. Calder, Jr.
		Richard D. Calder, Jr.
		President, Chief Executive Officer and Director

EX-32.22

Exhibit 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of GTT Communications, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael T. Sicoli, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my best knowledge:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 4, 2017	/s/ Michael T. Sicoli
		Michael T. Sicoli
		Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 02, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	GTT Communications, Inc.
Entity Central Index Key	0001315255
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	gtt
Entity Common Stock, Shares Outstanding (in shares)		41,378,971
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 130,739	$ 29,748
Accounts receivable, net of allowances of $3,730 and $2,656, respectively	99,977	76,292
Deferred costs	3,195	3,415
Prepaid expenses	20,534	5,765
Other assets	5,498	3,565
Total current assets	259,943	118,785
Restricted cash and cash equivalents	0	304,266
Property and equipment, net	470,292	43,369
Intangible assets, net	395,472	193,936
Goodwill	490,196	280,593
Other long-term assets	33,668	12,312
Total assets	1,649,571	953,261
Current liabilities:
Accounts payable	21,845	11,334
Accrued expenses and other current liabilities	54,586	36,888
Acquisition earn-outs and holdbacks	17,757	24,379
Current portion of capital lease obligations	1,648	1,015
Current portion of long-term debt	7,000	4,300
Deferred revenue	50,693	17,875
Total current liabilities	153,529	95,791
Capital lease obligations, long-term portion	769	120
Long-term debt	1,108,807	725,208
Deferred revenue, long-term portion	116,294	3,416
Deferred tax liability	28,649	0
Other long-term liabilities	19,906	967
Total liabilities	1,427,954	825,502
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 41,272,319 and 37,228,144 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	4	3
Additional paid-in capital	291,885	197,326
Accumulated deficit	(65,856)	(64,641)
Accumulated other comprehensive loss	(4,416)	(4,929)
Total stockholders' equity	221,617	127,759
Total liabilities and stockholders' equity	$ 1,649,571	$ 953,261

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for doubtful accounts receivable, current	$ 3,730	$ 2,656
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	80,000,000	80,000,000
Common stock, shares, issued (in shares)	41,272,319	37,228,144
Common stock, shares, outstanding (in shares)	41,272,319	37,228,144

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Revenue:
Telecommunications services	$ 186,216	$ 128,914	$ 368,580	$ 253,350
Operating expenses:
Cost of telecommunications services	93,418	68,272	184,787	134,469
Selling, general and administrative expenses	46,696	35,940	99,628	68,134
Severance, restructuring and other exit costs	52	0	10,723	1,495
Depreciation and amortization	31,463	15,661	61,823	31,260
Total operating expenses	171,629	119,873	356,961	235,358
Operating income	14,587	9,041	11,619	17,992
Other expense:
Interest expense, net	(16,623)	(7,125)	(32,455)	(14,497)
Loss on debt extinguishment	0	(1,632)	(5,659)	(1,632)
Other expense, net	70	(188)	(38)	(467)
Total other expense	(16,553)	(8,945)	(38,152)	(16,596)
(Loss) income before income taxes	(1,966)	96	(26,533)	1,396
(Benefit from) provision for income taxes	(2,615)	5	(14,071)	409
Net income (loss)	$ 649	$ 91	$ (12,462)	$ 987
Earnings (loss) per share:
Basic (in dollars per share)	$ 0.02	$ 0.00	$ (0.31)	$ 0.03
Diluted (in dollars per share)	$ 0.02	$ 0.00	$ (0.31)	$ 0.03
Weighted average shares:
Basic (in shares)	41,244,595	37,065,651	40,849,853	37,016,720
Diluted (in shares)	41,819,377	37,678,120	40,849,853	37,575,397

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 649	$ 91	$ (12,462)	$ 987
Other comprehensive income (loss):
Foreign currency translation adjustment	127	(1,733)	513	(1,911)
Comprehensive income (loss)	$ 776	$ (1,642)	$ (11,949)	$ (924)

XML

Condensed Consolidated Statement of Stockholders' Equity - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Balance (in shares) at Dec. 31, 2016		37,228,144
Balance at Dec. 31, 2016	$ 127,759	$ 3	$ 197,326	$ (64,641)	$ (4,929)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation for options issued	766		766
Share-based compensation for restricted stock issued (in shares)		608,324
Share-based compensation for restricted stock issued	9,136		9,136
Tax withholding related to the vesting of restricted stock units (in shares)		(155,389)
Tax withholding related to the vesting of restricted stock units	(2,307)		(2,307)
Stock issued in connection with employee stock purchase plan (in shares)		13,208
Stock issued in connection with employee stock purchase plan	289		289
Stock issued in connection with acquisition (in shares)		3,329,872
Stock issued in connection with acquisition	86,092	$ 1	86,091
Stock options exercised (in shares)		248,160
Stock options exercised	584		584
Net loss	(12,462)
Foreign currency translation	513				513
Balance (in shares) at Jun. 30, 2017		41,272,319
Balance at Jun. 30, 2017	221,617	$ 4	$ 291,885	(65,856)	$ (4,416)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of adjustment for unrecognized windfall benefits	$ 11,247			$ 11,247

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Cash flows from operating activities:
Net (loss) income	$ (12,462)	$ 987
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	61,823	31,260
Share-based compensation	9,902	6,052
Debt discount amortization	499	341
Loss on debt extinguishment	5,659	1,632
Amortization of debt issuance costs	1,646	850
Excess tax benefit from stock-based compensation	(3,585)	0
Deferred income taxes	(9,890)	0
Non-cash deferred revenue	(21,346)	(3,312)
Non-cash deferred costs	3,838	1,322
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(1,271)	(7,941)
Prepaid expenses and other current assets	1,025	(1,236)
Deferred costs and other assets	49	(910)
Accounts payable	(9,581)	(10,612)
Accrued expenses and other current liabilities	(2,554)	(1,720)
Deferred revenue and other liabilities	2,509	2,643
Net cash provided by operating activities	26,261	19,356
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(552,500)	(13,751)
Purchase of customer contracts	(14,943)	(6,000)
Change in restricted cash and cash equivalents	304,266	0
Purchases of property and equipment	(17,752)	(12,288)
Net cash used in investing activities	(280,929)	(32,039)
Cash flows from financing activities:
Proceeds from revolving line of credit	0	30,000
Repayment of revolving line of credit	(20,000)	(29,000)
Proceeds from term loan	696,500	29,850
Repayment of term loan	(429,275)	(2,075)
Proceeds from senior note	159,000	0
Payment of earn-out and holdbacks	(20,257)	(10,862)
Debt issuance costs	(27,730)	(904)
Repayment of capital leases	(624)	(538)
Proceeds from issuance of common stock under employee stock purchase plan	289	0
Tax withholding related to the vesting of restricted stock units	(2,307)	(1,635)
Exercise of stock options	584	224
Net cash provided by financing activities	356,180	15,060
Effect of exchange rate changes on cash	(521)	(1,634)
Net increase in cash and cash equivalents	100,991	743
Cash and cash equivalents at beginning of period	29,748	14,630
Cash and cash equivalents at end of period	130,739	15,373
Supplemental disclosure of cash flow information:
Cash paid for interest	30,789	13,256
Cash paid for income taxes	$ 592	$ 284

XML

ORGANIZATION AND BUSINESS

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND BUSINESS

ORGANIZATION AND BUSINESS

Organization and Business

GTT Communications, Inc. (“GTT” or the "Company") is a provider of cloud networking services to multinational clients. The Company offers a broad portfolio of global services including: private networking services, Internet services, optical transport, managed networking and security services, voice and unified communication services, and video transport services.

GTT's global Tier 1 IP network delivers connectivity to clients around the world. The Company provides services to leading multinational enterprise, carrier, and government customers.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed on March 8, 2017. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.

The condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and its results of operations. The operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year 2017 or for any other interim period. The December 31, 2016 consolidated balance sheet is condensed from the audited financial statements as of that date, but does not include all disclosures required by GAAP.

Reclassification Within Condensed Consolidated Statement of Cash Flows

As a result of further policy alignment related to acquired businesses, certain prior period amounts in the condensed consolidated statements of cash flows, have been reclassified to conform with the current period presentation to better reflect the nature of these activities. The Company has reclassified $3.3 million from the "Deferred revenue and other liabilities" line to the "Non-cash deferred revenue" line and $1.3 million from the "Deferred costs and other assets" line to the "Non-cash deferred costs" line for the six months endedJune 30, 2016. These reclassifications had no impact on the net change in cash and cash equivalents or cash flows from operating, investing and financing activities for any periods presented.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when establishing allowances for doubtful accounts and accruals for billing disputes, determining useful lives for depreciation and amortization and accruals for exit activities, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, accounting for income taxes and related valuation allowances against deferred tax assets and estimating the grant date fair values used to compute the share-based compensation expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

Segment Reporting

The Company reports operating results and financial data in one operating and reporting segment. The chief operating decision maker manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across its entire customer base, and provide incentives to employees based on the success of the organization as a whole. Although certain information regarding selected products or services are discussed for purposes of promoting an understanding of the Company's complex business, the chief operating decision maker manages the Company and allocates resources at the consolidated level.

Revenue Recognition

The Company delivers six primary services to its customers — optical transport, WAN connectivity services, high bandwidth Internet connectivity services, managed network and security services, global communication and collaboration services, and video transport services. Certain of its current commercial activities have features that may be considered multiple elements, specifically when the Company sells its connectivity services in addition to customer premise equipment ("CPE"). The Company believes that there is sufficient evidence to determine each element’s fair value and, as a result, in those arrangements where there are multiple elements, the service revenue is recorded ratably over the term of the agreement and the equipment is accounted for as a sale, at the time of sale as long as collectability is reasonably assured.

The Company's services are provided under contracts that typically include an installation charge along with payments of recurring charges on a monthly basis for use of the services over a committed term. Its contracts with customers specify the terms and conditions for providing such services, including installation date, recurring and non-recurring fees, payment terms, and length of term. These contracts call for the Company to provide the service in question (e.g., data transmission between point A and point Z), to manage the activation process, and to provide ongoing support (in the form of service maintenance and trouble-shooting) during the service term. The contracts do not typically provide the customer any rights to use specifically identifiable assets. Furthermore, the contracts generally provide the Company with discretion to engineer (or re-engineer) a particular network solution to satisfy each customer’s data transmission requirement, and typically prohibit physical access by the customer to the network infrastructure used by the Company and its suppliers to deliver the services.

The Company recognizes revenue as follows:

Recurring Revenue. Recurring revenue represents the substantial majority of the Company's revenue, and consists of fees charged for ongoing services that are generally fixed in price and billed on a recurring monthly basis (one month in advance) for a specified term. At the end of the term, most contracts provide for a continuation of services on the same terms, either for a specified renewal period (e.g., one year) or on a month-to-month basis. The Company records recurring revenue based on the fees agreed to in each contract, as long as the contract is in effect.

Usage Revenue. Usage revenue represents variable charges for certain services, based on specific usage of those services, or usage above a fixed threshold, billed monthly in arrears. The Company records usage revenue based on actual usage charges billed using the rates and/or thresholds specified in each contract.

Non-recurring Revenue. Non-recurring revenue consists of charges for installation in connection with the delivery of recurring communications services, late payments, cancellation fees, early termination fees, and equipment sales. Fees billed for installation services are initially recorded as deferred revenue then recognized ratably over the contractual term of the recurring service. Fees charged for late payments, cancellation (pre-installation) or early termination (post-installation) are typically fixed or determinable per the terms of the respective contract, and are recognized as revenue when billed. In addition, from time to time the Company sells communications and/or networking equipment to its customers in connection with its data networking services. The Company recognizes revenue from the sale of equipment at the contracted selling price when title to the equipment passes to the customer (generally F.O.B. origin).

Prepaid Capacity Sales and Indefeasible Right to Use. From time to time we sell capacity on a long-term basis, where a certain portion of the contracted revenue is prepaid upon acceptance of the service by the customer. This prepaid amount is initially recorded as deferred revenue and amortized ratably over the term of the contract. Certain of these prepaid capacity sales are in the form of Indefeasible Rights to Use ("IRUs"), where the customer has the right to use the capacity for the life of the fiber optic cable.  In the case of IRUs, any up-front payments are recognized ratably over a 20 year term, consistent with our assumed useful life of the associated fiber optic cable.

The Company records revenue only when collectability is reasonably assured, irrespective of the type of revenue.

Universal Service Fund ("USF"), Gross Receipts Taxes and Other Surcharges

The Company is liable in certain cases for collecting regulatory fees and/or certain sales taxes from its customers and remitting the fees and taxes to the applicable governing authorities. Where the Company collects on behalf of a regulatory agency, the Company does not record any revenue. The Company records applicable taxes on a net basis.

Cost of Telecommunications Services

Cost of telecommunications services includes direct costs incurred in accessing other telecommunications providers’ networks in order to maintain the Company's global IP network and provide telecommunication services to the Company's customers, including access, co-location, and usage-based charges.

Share-Based Compensation

The Company issues three types of equity grants under its share-based compensation plan: time-based restricted stock, time-based stock options and performance-based restricted stock. The time-based restricted stock and stock options generally vest over a four-year period, contingent upon meeting the requisite service period requirement. Performance awards typically vest over a shorter period, e.g. one to two years, starting when the performance criteria established in the grant have been met.

The share price of the Company's common stock as reported on the NYSE MKT on the date of grant is used as the fair value for all restricted stock. The Company uses the Black-Scholes option-pricing model to determine the estimated fair value for stock options. Critical inputs into the Black-Scholes option-pricing model include the following: option exercise price; fair value of the stock price; expected life of the option; annualized volatility of the stock; annual rate of quarterly dividends on the stock; and risk-free interest rate.

Implied volatility is calculated as of each grant date based on our historical stock price volatility along with an assessment of a peer group. Other than the expected life of the option, volatility is the most sensitive input to our option grants. The risk-free interest rate used in the Black-Scholes option-pricing model is determined by referencing the U.S. Treasury yield curve rates with the remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on our historical analysis of attrition levels. Forfeiture estimates are updated quarterly for actual forfeitures.

The expense is recognized on a straight-line basis over the vesting period. The Company recognizes share-based compensation expense for performance awards when the Company considers the achievement of the performance criteria to be probable.

Income Taxes

Income taxes are accounted for under the asset and liability method pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the expected future consequences attributable to the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. Further, deferred tax assets are recognized for the expected realization of available net operating loss and tax credit carryforwards. A valuation allowance is recorded on gross deferred tax assets when it is “more likely than not” that such asset will not be realized. When evaluating the realizability of deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies, and expectations of future earnings. The Company reviews its deferred tax assets on a quarterly basis to determine if a valuation allowance is required based upon these factors. Changes in the Company's assessment of the need for a valuation allowance could give rise to a change in such allowance, potentially resulting in additional expense or benefit in the period of change.

The Company's income tax provision includes U.S. federal, state, local and foreign income taxes and is based on pre-tax income or loss. In determining the annual effective income tax rate, the Company analyzes various factors, including its annual earnings and taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes and its ability to use tax credits and net operating loss carryforwards.

Under GAAP for income taxes, the amount of tax benefit to be recognized is the amount of benefit that is “more likely than not” to be sustained upon examination. The Company analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, the Company determines that uncertainties in tax positions exist, a liability is established in the consolidated financial statements. The Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for income taxes.

Comprehensive Income (Loss)

In addition to net income (loss), comprehensive income (loss) includes certain charges or credits to equity occurring other than as a result of transactions with stockholders. For the Company, this consists of foreign currency translation adjustments.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income or (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect, in periods with earnings and in which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options.

The table below details the calculations of earnings (loss) per share (in thousands, except for share and per share amounts):  

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017			2016
Numerator for basic and diluted EPS – earnings (loss) available to common stockholders	$	649	$	91	$	(12,462	)	$	987
Denominator for basic EPS – weighted average shares	41,244,595		37,065,651		40,849,853			37,016,720
Effect of dilutive securities	574,782		612,469		—			558,677
Denominator for diluted EPS – weighted average shares	41,819,377		37,678,120		40,849,853			37,575,397
Earnings (loss) per share: basic	$	0.02	$	—	$	(0.31	)	$	0.03
Earnings (loss) per share: diluted	$	0.02	$	—	$	(0.31	)	$	0.03

There were approximately 880,000 anti-dilutive common shares as of June 30, 2017 that were excluded from the computation of loss per share. There were approximately 128,000 anti-dilutive common shares that were excluded from the computation of earnings per share as of June 30, 2016. 

Cash and Cash Equivalents

Cash and cash equivalents may include deposits with financial institutions as well as short-term money market instruments, certificates of deposit and debt instruments with maturities of three months or less when purchased.

The Company invests its cash and cash equivalents and short-term investments in accordance with the terms and conditions of its Credit Agreement, which seeks to ensure both liquidity and safety of principal. The Company’s policy limits investments to instruments issued by the U.S. government and commercial institutions with strong investment grade credit ratings, and places restrictions on the length of maturity. As of June 30, 2017, the Company held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or non-government guaranteed mortgage-backed securities.

Restricted Cash and Cash Equivalents

Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents. In December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024. The proceeds of the private offering plus 60 days of prepaid interest, were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia Networks ("Hibernia") that occurred in January 2017. The proceeds were released from escrow at closing to fund the Hibernia acquisition.

Accounts Receivable, Net

Accounts receivable balances are stated at amounts due from the customer net of an allowance for doubtful accounts. Credit extended is based on an evaluation of the customer’s financial condition and is granted to qualified customers on an unsecured basis.

The Company, pursuant to its standard service contracts, is entitled to impose a monthly finance charge of a certain percentage per month with respect to amounts that are past due. The Company’s standard terms require payment within 30 days of the date of the invoice. The Company treats invoices as past due when they remain unpaid, in whole or in part, beyond the payment date set forth in the applicable service contract.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade receivables are past due, the customer’s payment history and current ability to pay its obligation to the Company, and the condition of the general economy. Specific reserves are also established on a case-by-case basis by management. Credit losses have been within management's estimates. Actual bad debts, when determined, reduce the allowance, the adequacy of which management then reassesses. The Company writes off accounts after a determination by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management's determination that the costs of pursuing collection outweighs the likelihood of recovery. The allowance for doubtful accounts was $3.7 million and $2.7 million as of June 30, 2017 and December 31, 2016, respectively.

Deferred Costs

Installation costs related to provisioning of recurring communications services that the Company incurs from independent third party suppliers, directly attributable and necessary to fulfill a particular service contract, and which would not have been incurred but for the occurrence of that service contract, are recorded as deferred costs and expensed ratably over the contractual term of service in the same manner as the deferred revenue arising from that contract. Based on historical experience, the Company believes the initial contractual term is the best estimate for the period of earnings. If any installation costs exceed the amount of corresponding deferred revenue, the excess cost is recognized in the current period.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation.Depreciation on these assets is computed on a straight-line basis over the estimated useful lives of the assets. Assets are recorded at acquired cost plus any internal labor to prepare the asset for installation to become functional. Assets and liabilities under capital leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements and assets under capital leases are amortized over the shorter of the term of the lease, excluding optional extensions, or the useful life. Expenditures for maintenance and repairs are expensed as incurred. Depreciable lives used by the Company for its classes of assets are as follows:

Freehold Land and Buildings	30 years
Furniture and Fixtures	7 years
Fiber Optic Cable	20 years
Fiber Optic Network Equipment	5 - 15 years
Leasehold Improvements	up to 10 years
Computer Hardware and Software	3-5 years

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset were to exceed its estimated future undiscounted cash flows, the asset would be considered to be impaired. Impairment losses would then be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are reported at the lower of the carrying amount or fair value less costs to sell.

Software Capitalization

Software development costs include costs to develop software programs to be used solely to meet the Company's internal needs. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a function it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred. The Company capitalized software costs of $0.4 million and $0.4 million for the three months ended June 30, 2017 and 2016, respectively, and $0.8 million and $0.8 million for the six months endedJune 30, 2017 and 2016, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in October, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill impairment. The Company's impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that fair value of the reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the Company against the planned results used in the last quantitative goodwill impairment test. Additionally, the Company's fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If it is determined under the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step quantitative impairment test is performed. Under the first step, the estimated fair value of the Company would be compared with its carrying value (including goodwill). If the fair value of the Company exceeds its carrying value, step two does not need to be performed. If the estimated fair value of the Company is less than its carrying value, an indication of goodwill impairment exists for the Company and it would need to perform step two of the impairment test. Under step two, an impairment loss would be recognized for any excess of the carrying amount of the Company's goodwill over the implied fair value of that goodwill. Fair value of the Company under the two-step assessment is determined using a combination of both income and market-based approaches. There were no goodwill impairments identified for the six months endedJune 30, 2017.

Intangible assets arising from business combinations, such as acquired customer contracts and relationships, (collectively "customer relationships"), trade names, intellectual property or know-how, are initially recorded at fair value. The Company amortizes these intangible assets over the determined useful life which ranges from three to seven years. The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized for the difference between fair value and the carrying value of the asset. There were no intangible asset impairments recognized for the six months endedJune 30, 2017.

Business Combinations

The Company includes the results of operations of the businesses that it acquires commencing on the respective dates of acquisition. The Company allocates the fair value of the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Asset Purchases

Periodically the Company acquires customer contracts that it accounts for as an asset purchase and records a corresponding intangible asset that is amortized over its estimated useful life. No goodwill is recorded in an asset acquisition. During the six months endedJune 30, 2017, the Company acquired customer contracts for an aggregate purchase price of $37.3 million, of which $14.9 million was paid during the six months ended June 30, 2017 at the acquisitions' respective closing dates. The remaining $22.4 million is expected to be paid in 2017 and 2018, subject to any indemnification claims made through the final payment date. During 2016, the Company acquired customer contracts for an aggregate purchase price of $41.3 million, of which $20.0 million was paid in 2016 at the respective closing dates, of which $6.0 million was paid during the six months ended June 30, 2016. Of the remaining $21.3 million, $18.0 million was paid during the six months ended June 30, 2017 and the remaining $3.3 million is expected to be paid in the remainder of 2017, subject to any indemnification claims made through the final payment dates.

Accrued Supplier Expenses

The Company accrues estimated charges owed to its suppliers for services. The Company bases this accrual on the supplier contract, the individual service order executed with the supplier for that service, and the length of time the service has been active.

Disputed Supplier Expenses

In the normal course of business, the Company identifies errors by suppliers with respect to the billing of services. The Company performs bill verification procedures to ensure that errors in the Company's suppliers' billed invoices are identified and resolved. If the Company concludes that a vendor has billed inaccurately, the Company will record a liability only for the amount that it believes is owed. As of June 30, 2017, the Company had open disputes not accrued for of $4.4 million. As of December 31, 2016, the Company had open disputes not accrued for of $5.8 million.

Acquisition Earn-outs and Holdbacks

Acquisition earn-outs and holdbacks represent either contingent consideration subject to re-measurement to fair value, or fixed deferred consideration to be paid out at some point in the future, typically on the one-year anniversary of an acquisition. Contingent consideration is remeasured to fair value at each reporting period. The portion of the deferred consideration due within one year is recorded as a current liability until paid, and any consideration due beyond one year is recorded in other long-term liabilities.

As of June 30, 2017 and December 31, 2016, there was no contingent consideration subject to re-measurement outstanding.

Debt Issuance Costs

Debt issuance costs represent costs that qualify for deferral associated with the issuance of new debt or the modification of existing debt facilities. The unamortized balance of debt issuance costs is presented as a reduction to the carrying value of long-term debt. Debt issuance costs are amortized and recognized on the condensed consolidated statements of operations as interest expense. The unamortized debt issuance costs were $31.7 million and $9.3 million as of June 30, 2017 and December 31, 2016, respectively.

Original Issuance Discounts and Premiums

Original issuance discounts and premiums ("OID") is the difference between the face value of debt and the amount of principal received when the loan was originated. When the debt reaches maturity, the face value of the debt is payable. The Company recognizes OID by accretion of the discount or premium as interest expense, net over the term of the debt. The unamortized portion of the OID was a $1.0 million net premium and a $7.0 million discount as of June 30, 2017 and December 31, 2016, respectively.

Translation of Foreign Currencies

For non-U.S. subsidiaries, the local currency is the functional currency for financial reporting purposes. These condensed consolidated financial statements have been reported in U.S. Dollars by translating asset and liability amounts of foreign subsidiaries at the closing currency exchange rate, equity amounts at historical rates, and the results of operations and cash flow at the average currency exchange rate prevailing during the periods reported. The net effect of such translation gains and losses are reflected in accumulated other comprehensive loss in the stockholders' equity section of the condensed consolidated balance sheets.

 Transactions denominated in foreign currencies other than a subsidiary's functional currency are recorded at the rates of exchange prevailing at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising upon settlement of a transaction are reported in the condensed consolidated statements of operations in other expense, net.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following hierarchy of fair value:

Level 1: Quoted prices for identical assets or liabilities in active markets that can be assessed at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation.

When determining the fair value measurements for assets and liabilities required to be recorded at fair value, management considers the principal or most advantageous market in which it would transact and considers risks, restrictions, or other assumptions that market participants would use when pricing the asset or liability.

As of June 30, 2017 and December 31, 2016, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, and acquisition earn-outs and holdbacks approximated fair value due to the short-term nature of these instruments.

The table below presents the fair values for the Company's long-term debt as well as the input level used to determine these fair values as of June 30, 2017 and December 31, 2016. The carrying amounts exclude any debt issuance costs or original issuance discount:

					Fair Value Measurement Using
	Total Carrying Value in Consolidated Balance Sheet				Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (1) (Level 1)
(amounts in thousands)	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
Liabilities not recorded at fair value in the Financial Statements:
Long-term debt, including the current portion:
Term loan	$	696,500	$	425,775	$	699,111	$	425,775
Senior notes	450,000		300,000		479,250		300,000
Total long-term debt, including current portion	$	1,146,500	$	725,775	$	1,178,361	$	725,775

⁽¹⁾ Fair value based on the bid quoted price.

Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets. Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).

Concentrations of Credit Risk

Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. At times during the periods presented, the Company had funds in excess of $250,000 insured by the U.S. Federal Deposit Insurance Corporation, or in excess of similar Deposit Insurance programs outside of the United States, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

The Company's trade accounts receivable are generally unsecured and geographically dispersed. No single customer's trade accounts receivable balance as of June 30, 2017 or December 31, 2016 exceeded 10% of the Company's consolidated accounts receivable, net. No single customer accounted for more than 10% of revenue for the six months ended June 30, 2017 and 2016.

Newly Adopted Accounting Principles

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions. The ASU changes five aspects of the accounting for share-based payment award transactions: (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for taxes. The Company adopted ASU 2016-09 effective January 1, 2017. Excess tax benefits for share-based payments are now recognized against income tax expense rather than additional paid-in capital and are included in operating cash flows rather than financing cash flows. The recognition of excess tax benefits has been applied on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. As of January 1, 2017, the cumulative effect of adopting ASU 2016-09 was an increase in deferred tax assets of $11.2 million and a decrease in accumulated deficit of $11.2 million as a result of recognizing $27.8 million previously unrecognized excess tax benefits from share-based compensation. The Company will continue to account for forfeitures as they occur. Cash paid by by the Company when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity rather than an operating activity. Additionally, the Company has applied the provisions of this ASU on a prospective basis in the condensed consolidated statements of cash flows and prior periods have not been adjusted.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for the Company in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company has completed its initial impact assessment and is in the process of developing an implementation plan to include any potential process or system changes; however, the assessment of the impact to the Company’s results of operations, financial position and cash flows as a result of this guidance is ongoing. The Company will adopt this new standard as of January 1, 2018 and currently expects to apply the modified retrospective method, which may result in a cumulative effect adjustment as of the date of adoption. Both the Company’s initial assessment and its selected transition method may change depending on the results of the Company’s final assessment of the impact to its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice of how certain transactions are classified and presented in the statement of cash flows in accordance with ASC 230. The ASU amends or clarifies guidance on eight specific cash flow issues, some of which include classification on debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures, but the Company does not expect the new guidance to have a material impact.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

In March 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill (Step 2) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (as determined in Step 1). The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the new guidance to have a material impact on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of share-based equity awards must be accounted for as modifications. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award are not the same immediately before and after the modification. The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

Other recent accounting pronouncements issued by the FASB during 2016 and through the six months ended ended June 30, 2017 are not believed to have a material impact on the Company's present or historical consolidated financial statements.

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BUSINESS ACQUISITIONS

6 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS

Since its formation, the Company has consummated a number of transactions accounted for as business combinations as part of its growth strategy. The acquisitions of these businesses, which are in addition to periodic purchases of customer contracts, have allowed the Company to increase the scale at which it operates, which in turn affords the Company the ability to increase its operating leverage, extend its network, and broaden its customer base.

The accompanying condensed consolidated financial statements include the operations of the acquired entities from their respective acquisition dates. All of the acquisitions have been accounted for as a business combination. Accordingly, consideration paid by the Company to complete the acquisitions is initially allocated to the respective assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The recorded amounts for acquired assets and liabilities assumed are provisional and subject to change during the measurement period, which is up to 12 months from the date of acquisition.

In January 2017, the Company acquired Hibernia. The Company paid $529.6 million in cash consideration, of which $14.6 million was net cash acquired, and 3,329,872 unregistered shares of the Company's common stock, initially valued at $75.0 million on the date of announcement, and ultimately valued at $86.1 million at closing. The results of Hibernia have been included from January 1, 2017.

In June 2017, the Company acquired Perseus Telecom ("Perseus"). The Company paid $37.5 million in cash consideration and assumed $1.9 million in capital leases. $4.0 million of the initial cash consideration is held in escrow for one year, subject to reduction for any indemnification claims made by the Company prior to such date. The results of Perseus have been included from June 1, 2017.

The table below reflects the Company's provisional estimates of the acquisition date fair values of the assets acquired and liabilities assumed for its acquisitions over the six months endedJune 30, 2017 (amounts in thousands):

Purchase Price	Hibernia			Perseus
Cash paid at closing, including working capital estimate	$	529,600		$	37,500
Common stock (1)	86,092			—
Purchase consideration	$	615,692		$	37,500
Purchase Price Allocation
Assets acquired:
Current assets	$	51,811		$	2,198
Property, plant and equipment	433,248			5,255
Other assets	359			—
Intangible assets - customer lists	166,740			22,500
Intangible assets - tradename	720			—
Intangible assets - other	6,800			—
Goodwill	186,228			23,375
Total assets acquired	845,906			53,328
Liabilities assumed:
Current liabilities	(40,749		)	(9,695		)
Capital leases, long-term portion	—			(1,906		)
Deferred revenue	(163,300		)	(1,248		)
Deferred tax liability	(26,165		)	(2,791		)
Other long-term liabilities	—			(188		)
Total liabilities assumed	(230,214		)	(15,828		)
Net assets acquired	$	615,692		$	37,500

(1) Common stock fair value equals the closing share price of $27.80 less a discount for lack of marketability

Intangible assets acquired related to the Hibernia acquisition include customer relationships, the Hibernia tradename, and various indefeasible right to use ("IRU") contracts. Intangible assets related to customer relationships, tradename, and IRUs are subject to straight-line amortization. The customer relationships have a weighted-average useful life of 10 years, the trademarks have a useful life of 2 years, and the IRUs have a useful life of 10 years.

Intangible assets acquired related to Perseus include customer relationships and are subject to straight-line amortization. The customer relationships have a weighted-average useful life of 8 years.

Amortization expense related to intangible assets created as a result of the Hibernia and Perseus acquisitions of $4.6 million and $9.1 million has been recorded for the three and six months ended June 30, 2017, respectively. Estimated amortization expense related to these for each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	10,263
2018	20,527
2019	20,167
2020	20,167
2021	20,167
2022 and beyond	96,379
Total	$	187,670

Goodwill in the amount of $186.2 million and $23.4 million was recorded as a result of the acquisitions of Hibernia and Perseus, respectively. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill is not expected to be deductible for tax purposes. Goodwill will not be amortized but instead will be tested for impairment at least annually and more frequently if certain indicators of impairment are present.

For material acquisitions completed during 2016, 2015, and 2014, please refer to Note 3 to the consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Acquisition Method Accounting Estimates

The Company initially recognizes the assets and liabilities acquired from the aforementioned acquisitions based on its preliminary estimates of their acquisition date fair values. As additional information becomes known concerning the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is no longer than a one year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

Transaction Costs

Transaction costs describe the broad category of costs the Company incurs in connection with signed and/or closed acquisitions. There are two types of costs that the Company accounts for:

•Severance, restructuring and other exit costs

•Transaction and integration costs

Severance, restructuring and other exit costs include severance and other one-time benefits for terminated employees; termination charges for leases and supplier contracts; and other costs incurred associated with an exit activity. These costs are reported separately in the condensed consolidated statements of operations during the three and six months ended June 30, 2017. Refer to Note 9 of these condensed consolidated financial statements for further information on severance, restructuring and other exit costs.

Transaction and integration costs include expenses associated with legal, accounting, regulatory and other transition services rendered in connection with acquisition, travel expense, and other non-recurring direct expenses associated with acquisitions. Transaction and integration costs are expensed as incurred in support of the integration. The Company incurred transaction and integration costs of $2.3 million and $1.1 million during the three months ended June 30, 2017 and 2016, respectively, and $10.4 million and $2.4 million during the six months endedJune 30, 2017 and 2016, respectively. Transaction and integration costs have been included in selling, general and administrative expenses in the condensed consolidated statements of operations and in cash flows from operating activities in the condensed consolidated statements of cash flows.

Pro forma Financial Information (Unaudited)

The pro forma results presented below include the effects of the Company's acquisitions during 2016 and 2017 as if the acquisitions had occurred on January 1, 2016. The pro forma net income (loss) for the three and six months ended June 30, 2017 and 2016, respectively, includes the additional depreciation and amortization resulting from the adjustments to the value of property, plant and equipment and intangible assets resulting from acquisition accounting and adjustment to amortized revenue during the first and second quarters of 2017 and 2016, respectively, as a result of the acquisition date valuation of assumed deferred revenue. The pro forma results also include interest expense associated with debt used to fund the acquisitions. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2016.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
(Amounts in thousands, except per share and share data)
Revenue	$	191,350		$	181,106		$	381,572		$	360,298
Net loss	$	(650	)	$	(2,449	)	$	(15,619	)	$	(1,844	)
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Denominator for basic EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592
Denominator for diluted EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592

In June 2017, the Company entered into an agreement to acquire Global Capacity.  The purchase price will be $100.0 million in cash plus 1,850,000 shares of the Company's common stock. The acquisition is expected to close at the end of the quarter ending September 30, 2017.

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GOODWILL AND INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND INTANGIBLE ASSETS

GOODWILL AND INTANGIBLE ASSETS

The goodwill balance was $490.2 million and $280.6 million as of June 30, 2017 and December 31, 2016, respectively. Additionally, the Company's intangible asset balance was $395.5 million and $193.9 million as of June 30, 2017 and December 31, 2016, respectively. The additions to both goodwill and intangible assets during the six months ended June 30, 2017 relate to the acquisition of Hibernia and Perseus (see Note 2 - Business Acquisitions) and asset purchase of customer contracts.

The change in the carrying amount of goodwill for the six months endedJune 30, 2017 was as follows (amounts in thousands):

	Perseus		Hibernia			Prior Year Acquisitions		Total
Balance at December 31, 2016	$	—	$	—		$	280,593	$	280,593
Initial goodwill associated with current year business combinations	23,375		186,538			—		209,913
Adjustments to current year business combinations	—		(310		)	—		(310		)
Adjustments to prior year business combinations	—		—			—		—
Balance at June 30, 2017	$	23,375	$	186,228		$	280,593	$	490,196

The following table summarizes the Company’s intangible assets as of June 30, 2017 and December 31, 2016 (amounts in thousands):

		June 30, 2017						December 31, 2016
	Amortization Period	Gross Asset Cost		Accumulated Amortization		Net Book Value		Gross Asset Cost		Accumulated Amortization		Net Book Value
Customer contracts	3-10 years	$	501,150	$	121,876	$	379,274	$	267,755	$	91,136	$	176,619
Non-compete agreements	3-5 years	4,571		4,467		104		4,572		4,420		152
Point-to-point FCC license fees	3 years	1,697		1,556		141		1,695		1,268		427
Intellectual property	10 years	17,379		2,943		14,436		17,379		2,076		15,303
Trade name	3 years	3,812		2,295		1,517		3,092		1,657		1,435
		$	528,609	$	133,137	$	395,472	$	294,493	$	100,557	$	193,936

Amortization expense was $16.6 million and $10.2 million for the three months ended June 30, 2017 and 2016, respectively, and $32.6 million and $19.4 million for the six months ended June 30, 2017 and 2016, respectively.

Estimated amortization expense related to intangible assets subject to amortization at June 30, 2017 in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	$	395,472

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table summarizes the Company’s accrued expenses and other current liabilities as of June 30, 2017 and December 31, 2016 (amounts in thousands):

	June 30, 2017		December 31, 2016
Compensation and benefits	$	8,647	$	10,035
Selling, general and administrative	4,840		4,534
Carrier costs	9,838		13,543
Restructuring	7,332		3,247
Fiber pair repurchase	10,000		—
Other	13,929		5,529
	$	54,586	$	36,888

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DEFERRED REVENUE

6 Months Ended

Jun. 30, 2017

Deferred Revenue Disclosure [Abstract]

DEFERRED REVENUE

DEFERRED REVENUE

The total deferred revenue as of June 30, 2017 was $167.0 million, consisting of unamortized prepaid capacity sales, IRUs, deferred non-recurring revenue and unearned revenue for amounts billed in advance to customers. Deferred revenue is recognized as current and noncurrent deferred revenue on the condensed consolidated balance sheet.

Prepaid capacity sales and IRUs represent $132.5 million of the total deferred revenue balance as of June 30, 2017 and remaining amortization at June 30, 2017 and in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

	Capacity Sales and IRUs
2017 remaining	$	11,488
2018	15,656
2019	11,224
2020	10,894
2021	10,024
2022 and beyond	73,209
	$	132,495

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DEBT

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

DEBT

DEBT

As of June 30, 2017 and December 31, 2016, long-term debt was as follows (amounts in thousands):

	June 30, 2017			December 31, 2016
Term loan	$	696,500		$	425,775
7.875% Senior unsecured notes	450,000			300,000
Revolving line of credit	—			20,000
Total debt obligations	1,146,500			745,775
Unamortized debt issuance costs	(31,662		)	(9,310		)
Unamortized original issuance premium (discount), net	969			(6,957		)
Carrying value of debt	1,115,807			729,508
Less current portion	(7,000		)	(4,300		)
Long-term debt less current portion	$	1,108,807		$	725,208

2017 Credit Agreement

On January 9, 2017, the Company entered into a credit agreement (the "2017 Credit Agreement") that provides a $700.0 million term loan facility and a $75.0 million revolving line of credit facility (which includes a $25.0 million letter of credit facility). In addition, the Company may request incremental term loan and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $150.0 million and an unlimited amount that is subject to pro forma compliance with certain net secured leverage ratio tests provided, however, that incremental revolving loan commitments may not exceed $25.0 million. The term loan facility was issued at an original issuance discount of $3.5 million.

The maturity date of the term loan facility is January 9, 2024 and the maturity date of the revolving loan facility is January 9, 2022. The principal amount of the term loan facility is payable in equal quarterly installments of $1.8 million commencing on March 31, 2017 and continuing thereafter until the maturity date when the remaining balance of outstanding principal amount is payable in full. In addition to scheduled mandatory repayments, the Company is also required to repay an amount of up to 50% of Excess Cash Flow (as defined in the Credit Agreement). No such excess cash payments were made during the six months ended June 30, 2017.

The Company may prepay loans under the 2017 Credit Agreement at any time, subject to certain notice requirements and LIBOR breakage costs. If within six months after entering into the 2017 Credit Agreement certain prepayments are made or any amendment reduces the “effective yield” applicable to all or a portion of the term loan, such prepayment or repriced portions of the term loan will be subject to a penalty equal to 1.00% of the outstanding term loan being prepaid or repriced.

At the Company's election, the loans under the 2017 Credit Agreement may be made as either Base Rate Loans or Eurodollar Loans, with applicable margins at 3.00% for Base Rate Loans and 4.00% for Eurodollar Loans. The Eurodollar Loans are subject to a floor of 1.00%, and the applicable margin for revolving loans is 2.50% for Base Rate Loans and 3.50% for Eurodollar Loans. The effective interest rate on term loan at June 30, 2017 and December 31, 2016 was5.0% and 5.8%, respectively.

On July 10, 2017, the Company entered into Amendment No. 1 (the "Repricing Amendment") to the 2017 Credit Agreement. The Repricing Amendment, among other things, reduces the applicable margin on Tranche B Term Loans to 2.25% for Base Rate Loans and 3.25% for Eurodollar Loans, and reduces the applicable margin on Revolving Loans to 2.00% for Base Rate Loans and 3.00% for Eurodollar Loans.  The amendment also establishes a soft call protection of 1.0% through January 10, 2018 for certain prepayments, refinancings  and amendments.

The obligations under the Credit Agreement are secured by the substantial majority of the tangible and intangible assets of the Company and the guarantors.

The 2017 Credit Agreement does not contain a financial covenant for the term loan facility, but includes a maximum consolidated net secured leverage ratio applicable to the revolving credit facility in the event that utilization exceeds 30% of the revolving loan facility commitment.

The proceeds of the term loan facility were used to finance the Hibernia acquisition, refinance the Company's existing credit facility and to pay costs and expenses associated with such transactions.

7.875% Senior Unsecured Notes

In December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of its 7.875% senior unsecured notes due in 2024 (the "Existing Notes"). The proceeds of the Existing Notes were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia in January 2017. The Company recognized the proceeds from the private offering as restricted cash and cash equivalents in its consolidated financial statements as of December 31, 2016. The funds were subsequently released with the closing of Hibernia. In connection with the offering, the Company incurred debt issuance costs of $9.7 million of which $0.5 million, was incurred in 2016 and the remainder was incurred in 2017.

In June 2017, the Company completed a private offering of $150.0 million aggregate principal amount of its 7.875% senior unsecured notes due in 2024 (the "New Notes"). The New Notes will be treated as a single series of debt securities with the Company's Existing Notes (together with the New Notes, the "Notes").  The New Notes have identical terms as the Existing Notes, other than the issue date and offering price. The New Notes were issued at a premium of $9.0 million. In connection with the offering, the Company incurred debt issuance costs of $2.9 million.

The aggregate contractual maturities of long-term debt (excluding unamortized debt issuance costs and unamortized OID) were as follows as of June 30, 2017 (amounts in thousands):

	Total debt
2017 remaining	$	3,500
2018	7,000
2019	7,000
2020	7,000
2021	7,000
2022 and beyond	1,115,000
	$	1,146,500

Debt Issuance Costs and Original Issuance Discounts and Premiums

In connection with the 2017 Credit Agreement and the Notes, the Company paid total new debt issuance costs of $24.8 million, of which $23.5 million qualified for deferral. $6.3 million of debt issuance costs were carried over from the prior term loan facility that qualified as a modification. These costs will be amortized to interest expense over the respective term of the underlying debt instruments using the effective interest method.

The unamortized balance of debt issuance costs as of June 30, 2017 and December 31, 2016 was $31.7 million and $9.3 million, respectively. Debt issuance costs are presented in the condensed consolidated balance sheets as a reduction to "Long-term debt." Interest expense associated with the amortization of debt issuance costs was $0.9 million and $0.4 million for the three months ended June 30, 2017 and 2016, respectively, and $1.6 million and $0.9 million for the six months endedJune 30, 2017 and 2016, respectively.

The term loan facility under the 2017 Credit Agreement was issued at an original issuance discount of $3.5 million. $5.0 million of the unamortized OID balance was carried over from the prior term loan facility that qualified as a modification. The total OID will be amortized to interest expense over the term of the term loan using the effective interest method. The New Notes were issued at a premium of $9.0 million. The total OID will be amortized to interest expense, net over the term of the New Notes using the effective interest method.

The unamortized balance of OID for the periods ended June 30, 2017 and December 31, 2016 was $1.0 million net premium and $7.0 million discount, respectively. OID is presented in the condensed consolidated balance sheets as a reduction to "Long-term debt." Interest expense, net associated with the amortization of OID was $0.2 million and $18 thousand for the three months ended June 30, 2017 and 2016, respectively, and $0.5 million and $0.3 million for the six months endedJune 30, 2017 and 2016, respectively.

The Company expensed an aggregate $5.7 million of debt issuance costs and OID that did not qualify for deferral as a Loss on Debt Extinguishment in the condensed consolidated statement of operations for the six months ended June 30, 2017.

Previous Debt Agreement - October 2015 Credit Agreement

On October 22, 2015, the Company entered into a credit agreement (the “October 2015 Credit Agreement”) that provided for a $400.0 million term loan facility and a $50.0 million revolving line of credit (which includes a $15.0 million letter of credit facility and a $10.0 million swingline facility). As of December 31, 2016, the Company had drawn $20.0 million under the revolving line of credit and had $29.5 million of borrowing capacity available. Amounts outstanding under October 2015 Credit agreement were paid in full at the closing of the 2017 Credit Agreement. The previous term loan was issued at an OID of $8.0 million.

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SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

Share-Based Compensation Plan

The Company grants share-based equity awards, including stock options and restricted stock, under the GTT Stock Plan. The GTT Stock Plan is limited to an aggregate 9,500,000 shares of which 7,977,987 have been issued and are outstanding as of June 30, 2017.

The GTT Stock Plan permits the granting of time-based stock options, time-based restricted stock and performance-based restricted stock to employees and consultants of the Company, and non-employee directors of the Company.

Time-based options granted under the GTT Stock Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire no later than 10 years from the grant date. The Company uses the Black-Scholes option-pricing model to determine the fair value of its stock option awards at the time of grant. The stock options generally vest over four years with 25% of the options becoming exercisable one year from the date of grant and the remaining 75% annually or quarterly over the following three years.

Time-based restricted stock granted under the GTT Stock Plan is valued at the GTT closing stock price on the date of grant. Time-based restricted stock generally vests over four years with 25% of the shares becoming unrestricted one year from the date of grant and the remaining 75% annually or quarterly over the following three years.

Performance-based restricted stock is granted under the GTT Stock Plan subject to the achievement of certain performance measures. Once achievement of these performance measures is considered probable, the Company starts to expense the fair value of the grant over the vesting period. The performance-based restricted stock is valued at the closing price on the date of grant. The performance grant vests quarterly over the vesting period once achievement of the performance measure has been met and approved by the Compensation Committee.

The Compensation Committee of the Board of Directors, as administrator of the GTT Stock Plan, has the discretion to authorize a different vesting schedule for any awards.

Share-Based Compensation Expense

The following tables summarize the share-based compensation expense recognized as a component of selling, general and administrative expense in the condensed consolidated statements of operations (amounts in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Stock options	$	334	$	306	$	675	$	732
Restricted stock	4,929		4,194		9,136		5,320
ESPP	63		—		91		—
Total	$	5,326	$	4,500	$	9,902	$	6,052

As of June 30, 2017, there was $44.8 million of total unrecognized compensation cost related to unvested share-based compensation awards. The following table summarizes the unrecognized compensation cost and the weighted average period over which the cost is expected to be amortized (amounts in thousands):

	June 30, 2017
	Unrecognized Compensation Cost		Weighted Average Remaining Period to be Recognized (Years)
Time-based stock options	$	2,680	1.86
Time-based restricted stock	29,167		2.58
Performance-based restricted stock	12,948		1.44
Total	$	44,795	2.21

The following tables summarize the stock options and restricted stock granted during the three and six months ended June 30, 2017 and 2016 (amounts in thousands, except shares data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Time-based stock options granted	—		11,000		—		155,958
Fair value of stock options granted	$	—	$	89	$	—	$	941
Time-based restricted stock granted	108,800		53,769		693,308		529,303
Fair value of time-based restricted stock granted	$	3,151	$	919	$	19,950	$	7,288

Performance-based Restricted Stock

The Company granted $8.5 million of restricted stock during 2014 and early 2015 contingent upon the achievement of certain performance criteria (the "2014 Performance Awards"). The fair value of the 2014 Performance Awards was calculated using the value of GTT common stock on the grant date. The Company started recognizing share-based compensation expense for these grants when the achievement of the performance criteria became probable, which was in the third quarter of 2015. The 2014 Performance Awards started vesting in the fourth quarter of 2015 when the performance criteria were met and they will continue to vest ratably through the third quarter of 2017. As of June 30, 2017, unamortized compensation cost related to the unvested 2014 Performance Awards was $0.1 million.

The Company granted $17.4 million of restricted stock during 2015 and 2017 contingent upon the achievement of certain performance criteria (the "2015 Performance Awards"). The fair value of the 2015 Performance Awards was calculated using the value of GTT common stock on the grant date. Upon announcement of the Hibernia acquisition in November 2016, the achievement of two of the four performance criteria became probable and the Company started recognizing share-based compensation expense for these grants. Expense recognition will continue through the fourth quarter of 2018. Additionally, upon announcement of the Global Capacity acquisition in June 2017, the achievement of the final two performance criteria became probable and the Company started recognizing share-based compensation expense for these grants. Expense recognition will continue through the first quarter of 2019. The Company recognized share-based compensation expense related to the 2015 Performance Awards of $1.7 million and $2.8 million for the three and six months ended June 30, 2017, respectively. No share-based compensation expense was recognized during the comparable 2016 period. As of June 30, 2017, unamortized compensation cost related to the unvested 2015 Performance Awards was $12.8 million.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("ESPP") that permits eligible employees to purchase common stock through payroll deductions at the lessor of the opening stock price or 85% of the closing stock price of the common stock during each of the three-month offering periods. The offering periods generally commence on the first day and the last day of each quarter. At June 30, 2017, 452,934 shares were available for issuance under the ESPP.

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INCOME TAXES

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate, adjusted for the effect of discrete items arising in the quarter. Each quarter the Company update its estimate of the annual effective tax rate.

The quarterly tax provision and the quarterly estimate of the Company's annual effective tax rate is subject to significant variation due to several factors, including variability in accurately predicting pre-tax and taxable income (loss) and the mix of jurisdictions to which they relate, effects of acquisitions and integrations, audit-related developments, changes in the Company's stock price, foreign currency gains (losses), and tax law developments. Additionally, the Company's effective tax rate may be more or less volatile based on the amount of pre-tax income or loss and impact of discrete items.

For the six months endedJune 30, 2017, the Company recorded a tax benefit of $14.1 million, which included $3.6 million of net discrete tax benefits primarily attributable to excess tax benefits from share-based compensation.

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SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS

6 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS

SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS

The Company incurred severance, restructuring and other exit costs associated with the acquisition of Hibernia and Perseus. These costs include employee severance costs, termination costs associated with facility leases and network agreements, and other exit costs related to the transactions.

The total exit costs recorded and paid relating to the acquisitions mentioned above are summarized as follows for the six months ended June 30, 2017 (amounts in thousands):

	Balance, December 31, 2016		Charges and Adjustments		Payments			Balance, June 30, 2017
Employee Termination Benefits	$	42	$	9,692	$	(5,714	)	$	4,020
Contract Terminations:
Lease terminations	859		500		(162		)	1,197
Other contract terminations	2,346		531		(762		)	2,115
	$	3,247	$	10,723	$	(6,638	)	$	7,332

The total exit costs recorded and paid relating to prior year acquisitions are summarized as follows for the six months ended June 30, 2016 (amounts in thousands):

	Balance, December 31, 2015		Charges and Adjustments		Payments			Balance, June 30, 2016
Employee Termination Benefits	$	1,903	$	870	$	(2,643	)	$	130
Contract Terminations:
Lease terminations	1,796		—		(741		)	1,055
Other contract terminations	3,035		625		(403		)	3,257
	$	6,734	$	1,495	$	(3,787	)	$	4,442

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Estimated annual commitments under contractual obligations are as follows at June 30, 2017 (amounts in thousands):

	Network Supply		Office Space		Capital Leases		Other
2017 remaining	$	65,263	$	2,012	$	917	$	1,254
2018	90,337		4,144		1,277		326
2019	48,139		3,522		223		51
2020	15,018		2,877		—		—
2021	6,420		2,365		—		—
2022 and beyond	43,769		6,987		—		—
	$	268,946	$	21,907	$	2,417	$	1,631

Network Supply Agreements

As of June 30, 2017, the Company had purchase obligations of $268.9 million associated with the telecommunications services that the Company has contracted to purchase from its suppliers. The Company’s supplier agreements fall into two key categories, the Company's core network backbone and customer specific locations (also referred to as 'last mile' locations). Supplier agreements associated with the Company's core network backbone are typically contracted on a one-year term and do not relate to any specific underlying customer commitments. The short-term duration allows the Company to take advantage of favorable pricing trends.

Supplier agreements associated with the Company's customer specific locations, which represents the substantial majority of the Company's network spending are typically contracted so the terms and conditions in both the vendor and customer contracts are substantially the same in terms of duration and capacity. The back-to-back nature of the Company’s contracts means that its network supplier obligations are generally mirrored by its customers' commitments to purchase the services associated with those obligations.

Office Space and Leases

The Company is currently headquartered in McLean, Virginia and has 14 other offices throughout North America, seven offices in Europe, one office in India, one office in Hong Kong, and one office in Brazil. The Company records rent expense using the straight-line method over the term of the respective lease agreement. Office facility rent expense was $1.0 million and $0.9 million for the three months ended June 30, 2017 and 2016, respectively, and $2.1 million and $1.9 million for the six months endedJune 30, 2017 and 2016, respectively.

Legal Proceedings

From time to time, the Company is a party to legal proceedings arising in the normal course of its business. As of June 30, 2017, the Company does not believe that it is a party to any current or pending legal action that could reasonably be expected to have a material adverse effect on its financial condition or results of operations and cash flows.

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ORGANIZATION AND BUSINESS (Policies)

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the Company’s audited financial statements and footnotes thereto for the fiscal year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K filed on March 8, 2017. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been omitted pursuant to such rules and regulations.

The condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s consolidated financial position and its results of operations. The operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results to be expected for the full fiscal year 2017 or for any other interim period. The December 31, 2016 consolidated balance sheet is condensed from the audited financial statements as of that date, but does not include all disclosures required by GAAP.

Reclassification Within Condensed Consolidated Statement of Cash Flows

Reclassification Within Condensed Consolidated Statement of Cash Flows

As a result of further policy alignment related to acquired businesses, certain prior period amounts in the condensed consolidated statements of cash flows, have been reclassified to conform with the current period presentation to better reflect the nature of these activities. The Company has reclassified $3.3 million from the "Deferred revenue and other liabilities" line to the "Non-cash deferred revenue" line and $1.3 million from the "Deferred costs and other assets" line to the "Non-cash deferred costs" line for the six months endedJune 30, 2016. These reclassifications had no impact on the net change in cash and cash equivalents or cash flows from operating, investing and financing activities for any periods presented.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are used when establishing allowances for doubtful accounts and accruals for billing disputes, determining useful lives for depreciation and amortization and accruals for exit activities, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, accounting for income taxes and related valuation allowances against deferred tax assets and estimating the grant date fair values used to compute the share-based compensation expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

Segment Reporting

Segment Reporting

The Company reports operating results and financial data in one operating and reporting segment. The chief operating decision maker manages the Company as a single profit center in order to promote collaboration, provide comprehensive service offerings across its entire customer base, and provide incentives to employees based on the success of the organization as a whole. Although certain information regarding selected products or services are discussed for purposes of promoting an understanding of the Company's complex business, the chief operating decision maker manages the Company and allocates resources at the consolidated level.

Revenue Recognition

Revenue Recognition

The Company delivers six primary services to its customers — optical transport, WAN connectivity services, high bandwidth Internet connectivity services, managed network and security services, global communication and collaboration services, and video transport services. Certain of its current commercial activities have features that may be considered multiple elements, specifically when the Company sells its connectivity services in addition to customer premise equipment ("CPE"). The Company believes that there is sufficient evidence to determine each element’s fair value and, as a result, in those arrangements where there are multiple elements, the service revenue is recorded ratably over the term of the agreement and the equipment is accounted for as a sale, at the time of sale as long as collectability is reasonably assured.

The Company's services are provided under contracts that typically include an installation charge along with payments of recurring charges on a monthly basis for use of the services over a committed term. Its contracts with customers specify the terms and conditions for providing such services, including installation date, recurring and non-recurring fees, payment terms, and length of term. These contracts call for the Company to provide the service in question (e.g., data transmission between point A and point Z), to manage the activation process, and to provide ongoing support (in the form of service maintenance and trouble-shooting) during the service term. The contracts do not typically provide the customer any rights to use specifically identifiable assets. Furthermore, the contracts generally provide the Company with discretion to engineer (or re-engineer) a particular network solution to satisfy each customer’s data transmission requirement, and typically prohibit physical access by the customer to the network infrastructure used by the Company and its suppliers to deliver the services.

The Company recognizes revenue as follows:

Recurring Revenue. Recurring revenue represents the substantial majority of the Company's revenue, and consists of fees charged for ongoing services that are generally fixed in price and billed on a recurring monthly basis (one month in advance) for a specified term. At the end of the term, most contracts provide for a continuation of services on the same terms, either for a specified renewal period (e.g., one year) or on a month-to-month basis. The Company records recurring revenue based on the fees agreed to in each contract, as long as the contract is in effect.

Usage Revenue. Usage revenue represents variable charges for certain services, based on specific usage of those services, or usage above a fixed threshold, billed monthly in arrears. The Company records usage revenue based on actual usage charges billed using the rates and/or thresholds specified in each contract.

Non-recurring Revenue. Non-recurring revenue consists of charges for installation in connection with the delivery of recurring communications services, late payments, cancellation fees, early termination fees, and equipment sales. Fees billed for installation services are initially recorded as deferred revenue then recognized ratably over the contractual term of the recurring service. Fees charged for late payments, cancellation (pre-installation) or early termination (post-installation) are typically fixed or determinable per the terms of the respective contract, and are recognized as revenue when billed. In addition, from time to time the Company sells communications and/or networking equipment to its customers in connection with its data networking services. The Company recognizes revenue from the sale of equipment at the contracted selling price when title to the equipment passes to the customer (generally F.O.B. origin).

Prepaid Capacity Sales and Indefeasible Right to Use. From time to time we sell capacity on a long-term basis, where a certain portion of the contracted revenue is prepaid upon acceptance of the service by the customer. This prepaid amount is initially recorded as deferred revenue and amortized ratably over the term of the contract. Certain of these prepaid capacity sales are in the form of Indefeasible Rights to Use ("IRUs"), where the customer has the right to use the capacity for the life of the fiber optic cable.  In the case of IRUs, any up-front payments are recognized ratably over a 20 year term, consistent with our assumed useful life of the associated fiber optic cable.

The Company records revenue only when collectability is reasonably assured, irrespective of the type of revenue.

Universal Service Fund ("USF"), Gross Receipts Taxes and Other Surcharges

The Company is liable in certain cases for collecting regulatory fees and/or certain sales taxes from its customers and remitting the fees and taxes to the applicable governing authorities. Where the Company collects on behalf of a regulatory agency, the Company does not record any revenue. The Company records applicable taxes on a net basis.

Cost of Telecommunications Services

Cost of telecommunications services includes direct costs incurred in accessing other telecommunications providers’ networks in order to maintain the Company's global IP network and provide telecommunication services to the Company's customers, including access, co-location, and usage-based charges.

Share-Based Compensation

Share-Based Compensation

The Company issues three types of equity grants under its share-based compensation plan: time-based restricted stock, time-based stock options and performance-based restricted stock. The time-based restricted stock and stock options generally vest over a four-year period, contingent upon meeting the requisite service period requirement. Performance awards typically vest over a shorter period, e.g. one to two years, starting when the performance criteria established in the grant have been met.

The share price of the Company's common stock as reported on the NYSE MKT on the date of grant is used as the fair value for all restricted stock. The Company uses the Black-Scholes option-pricing model to determine the estimated fair value for stock options. Critical inputs into the Black-Scholes option-pricing model include the following: option exercise price; fair value of the stock price; expected life of the option; annualized volatility of the stock; annual rate of quarterly dividends on the stock; and risk-free interest rate.

Implied volatility is calculated as of each grant date based on our historical stock price volatility along with an assessment of a peer group. Other than the expected life of the option, volatility is the most sensitive input to our option grants. The risk-free interest rate used in the Black-Scholes option-pricing model is determined by referencing the U.S. Treasury yield curve rates with the remaining term equal to the expected life assumed at the date of grant. Forfeitures are estimated based on our historical analysis of attrition levels. Forfeiture estimates are updated quarterly for actual forfeitures.

The expense is recognized on a straight-line basis over the vesting period. The Company recognizes share-based compensation expense for performance awards when the Company considers the achievement of the performance criteria to be probable.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method pursuant to GAAP. Under this method, deferred tax assets and liabilities are recognized for the expected future consequences attributable to the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period of the change. Further, deferred tax assets are recognized for the expected realization of available net operating loss and tax credit carryforwards. A valuation allowance is recorded on gross deferred tax assets when it is “more likely than not” that such asset will not be realized. When evaluating the realizability of deferred tax assets, all evidence, both positive and negative, is evaluated. Items considered in this analysis include the ability to carry back losses, the reversal of temporary differences, tax planning strategies, and expectations of future earnings. The Company reviews its deferred tax assets on a quarterly basis to determine if a valuation allowance is required based upon these factors. Changes in the Company's assessment of the need for a valuation allowance could give rise to a change in such allowance, potentially resulting in additional expense or benefit in the period of change.

The Company's income tax provision includes U.S. federal, state, local and foreign income taxes and is based on pre-tax income or loss. In determining the annual effective income tax rate, the Company analyzes various factors, including its annual earnings and taxing jurisdictions in which the earnings were generated, the impact of state and local income taxes and its ability to use tax credits and net operating loss carryforwards.

Under GAAP for income taxes, the amount of tax benefit to be recognized is the amount of benefit that is “more likely than not” to be sustained upon examination. The Company analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. If, based on this analysis, the Company determines that uncertainties in tax positions exist, a liability is established in the consolidated financial statements. The Company recognizes accrued interest and penalties related to unrecognized tax positions in the provision for income taxes.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

In addition to net income (loss), comprehensive income (loss) includes certain charges or credits to equity occurring other than as a result of transactions with stockholders. For the Company, this consists of foreign currency translation adjustments.

Earnings (Loss) Per Share

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income or (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect, in periods with earnings and in which they have a dilutive effect, the effect of common shares issuable upon exercise of stock options.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash and cash equivalents may include deposits with financial institutions as well as short-term money market instruments, certificates of deposit and debt instruments with maturities of three months or less when purchased.

The Company invests its cash and cash equivalents and short-term investments in accordance with the terms and conditions of its Credit Agreement, which seeks to ensure both liquidity and safety of principal. The Company’s policy limits investments to instruments issued by the U.S. government and commercial institutions with strong investment grade credit ratings, and places restrictions on the length of maturity. As of June 30, 2017, the Company held no direct investments in auction rate securities, collateralized debt obligations, structured investment vehicles or non-government guaranteed mortgage-backed securities.

Restricted Cash and Cash Equivalents

Restricted Cash and Cash Equivalents

Cash and cash equivalents that are contractually restricted from operating use are classified as restricted cash and cash equivalents. In December 2016, the Company completed a private offering of $300.0 million aggregate principal amount of 7.875% senior unsecured notes due in 2024. The proceeds of the private offering plus 60 days of prepaid interest, were deposited into escrow, where the funds remained until the closing of the acquisition of Hibernia Networks ("Hibernia") that occurred in January 2017. The proceeds were released from escrow at closing to fund the Hibernia acquisition.

Accounts Receivable, Net

Accounts Receivable, Net

Accounts receivable balances are stated at amounts due from the customer net of an allowance for doubtful accounts. Credit extended is based on an evaluation of the customer’s financial condition and is granted to qualified customers on an unsecured basis.

The Company, pursuant to its standard service contracts, is entitled to impose a monthly finance charge of a certain percentage per month with respect to amounts that are past due. The Company’s standard terms require payment within 30 days of the date of the invoice. The Company treats invoices as past due when they remain unpaid, in whole or in part, beyond the payment date set forth in the applicable service contract.

The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade receivables are past due, the customer’s payment history and current ability to pay its obligation to the Company, and the condition of the general economy. Specific reserves are also established on a case-by-case basis by management. Credit losses have been within management's estimates. Actual bad debts, when determined, reduce the allowance, the adequacy of which management then reassesses. The Company writes off accounts after a determination by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management's determination that the costs of pursuing collection outweighs the likelihood of recovery.

Deferred Costs, Debt Issuance Costs and Original Issue Discount

Original Issuance Discounts and Premiums

Original issuance discounts and premiums ("OID") is the difference between the face value of debt and the amount of principal received when the loan was originated. When the debt reaches maturity, the face value of the debt is payable. The Company recognizes OID by accretion of the discount or premium as interest expense, net over the term of the debt.

Debt Issuance Costs

Debt issuance costs represent costs that qualify for deferral associated with the issuance of new debt or the modification of existing debt facilities. The unamortized balance of debt issuance costs is presented as a reduction to the carrying value of long-term debt. Debt issuance costs are amortized and recognized on the condensed consolidated statements of operations as interest expense.

Deferred Costs

Installation costs related to provisioning of recurring communications services that the Company incurs from independent third party suppliers, directly attributable and necessary to fulfill a particular service contract, and which would not have been incurred but for the occurrence of that service contract, are recorded as deferred costs and expensed ratably over the contractual term of service in the same manner as the deferred revenue arising from that contract. Based on historical experience, the Company believes the initial contractual term is the best estimate for the period of earnings. If any installation costs exceed the amount of corresponding deferred revenue, the excess cost is recognized in the current period.

Property and Equipment

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset were to exceed its estimated future undiscounted cash flows, the asset would be considered to be impaired. Impairment losses would then be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of, if any, are reported at the lower of the carrying amount or fair value less costs to sell.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation.Depreciation on these assets is computed on a straight-line basis over the estimated useful lives of the assets. Assets are recorded at acquired cost plus any internal labor to prepare the asset for installation to become functional. Assets and liabilities under capital leases are recorded at the lesser of the present value of the aggregate future minimum lease payments or the fair value of the assets under lease. Leasehold improvements and assets under capital leases are amortized over the shorter of the term of the lease, excluding optional extensions, or the useful life. Expenditures for maintenance and repairs are expensed as incurred.

Software Capitalization

Software Capitalization

Software development costs include costs to develop software programs to be used solely to meet the Company's internal needs. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a function it previously did not perform. Software maintenance, data conversion and training costs are expensed in the period in which they are incurred.

Goodwill

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets acquired in a business combination. Goodwill is reviewed for impairment at least annually, in October, or more frequently if a triggering event occurs between impairment testing dates. The Company operates as a single operating segment and as a single reporting unit for the purpose of evaluating goodwill impairment. The Company's impairment assessment begins with a qualitative assessment to determine whether it is more likely than not that fair value of the reporting unit is less than its carrying value. The qualitative assessment includes comparing the overall financial performance of the Company against the planned results used in the last quantitative goodwill impairment test. Additionally, the Company's fair value is assessed in light of certain events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, and other relevant entity and Company specific events. The selection and assessment of qualitative factors used to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value involves significant judgment and estimates. If it is determined under the qualitative assessment that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a two-step quantitative impairment test is performed. Under the first step, the estimated fair value of the Company would be compared with its carrying value (including goodwill). If the fair value of the Company exceeds its carrying value, step two does not need to be performed. If the estimated fair value of the Company is less than its carrying value, an indication of goodwill impairment exists for the Company and it would need to perform step two of the impairment test. Under step two, an impairment loss would be recognized for any excess of the carrying amount of the Company's goodwill over the implied fair value of that goodwill. Fair value of the Company under the two-step assessment is determined using a combination of both income and market-based approaches.

Intangible Assets

Intangible assets arising from business combinations, such as acquired customer contracts and relationships, (collectively "customer relationships"), trade names, intellectual property or know-how, are initially recorded at fair value. The Company amortizes these intangible assets over the determined useful life which ranges from three to seven years. The Company reviews its intangible assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized for the difference between fair value and the carrying value of the asset.

Business Combinations and Asset Purchases

Business Combinations

The Company includes the results of operations of the businesses that it acquires commencing on the respective dates of acquisition. The Company allocates the fair value of the purchase price of its acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Asset Purchases

Periodically the Company acquires customer contracts that it accounts for as an asset purchase and records a corresponding intangible asset that is amortized over its estimated useful life. No goodwill is recorded in an asset acquisition.

Accrued Supplier Expenses

Accrued Supplier Expenses

The Company accrues estimated charges owed to its suppliers for services. The Company bases this accrual on the supplier contract, the individual service order executed with the supplier for that service, and the length of time the service has been active.

Disputed Supplier Expenses

Disputed Supplier Expenses

In the normal course of business, the Company identifies errors by suppliers with respect to the billing of services. The Company performs bill verification procedures to ensure that errors in the Company's suppliers' billed invoices are identified and resolved. If the Company concludes that a vendor has billed inaccurately, the Company will record a liability only for the amount that it believes is owed.

Acquisition Earn-outs and Holdbacks

Acquisition Earn-outs and Holdbacks

Acquisition earn-outs and holdbacks represent either contingent consideration subject to re-measurement to fair value, or fixed deferred consideration to be paid out at some point in the future, typically on the one-year anniversary of an acquisition. Contingent consideration is remeasured to fair value at each reporting period. The portion of the deferred consideration due within one year is recorded as a current liability until paid, and any consideration due beyond one year is recorded in other long-term liabilities.

Translation of Foreign Currencies

Translation of Foreign Currencies

For non-U.S. subsidiaries, the local currency is the functional currency for financial reporting purposes. These condensed consolidated financial statements have been reported in U.S. Dollars by translating asset and liability amounts of foreign subsidiaries at the closing currency exchange rate, equity amounts at historical rates, and the results of operations and cash flow at the average currency exchange rate prevailing during the periods reported. The net effect of such translation gains and losses are reflected in accumulated other comprehensive loss in the stockholders' equity section of the condensed consolidated balance sheets.

 Transactions denominated in foreign currencies other than a subsidiary's functional currency are recorded at the rates of exchange prevailing at the time of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Exchange differences arising upon settlement of a transaction are reported in the condensed consolidated statements of operations in other expense, net.

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company classifies certain assets and liabilities based on the following hierarchy of fair value:

Level 1: Quoted prices for identical assets or liabilities in active markets that can be assessed at the measurement date.

Level 2: Inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Inputs reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation.

When determining the fair value measurements for assets and liabilities required to be recorded at fair value, management considers the principal or most advantageous market in which it would transact and considers risks, restrictions, or other assumptions that market participants would use when pricing the asset or liability.

As of June 30, 2017 and December 31, 2016, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, other current liabilities, and acquisition earn-outs and holdbacks approximated fair value due to the short-term nature of these instruments.

Assets measured at fair value on a non-recurring basis include goodwill, tangible assets, and intangible assets. Such assets are reviewed quarterly for impairment indicators. If a triggering event has occurred, the assets are re-measured when the estimated fair value of the corresponding asset group is less than the carrying value. The fair value measurements, in such instances, are based on significant unobservable inputs (Level 3).

Concentrations of Credit Risk

Concentrations of Credit Risk

Financial instruments potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. At times during the periods presented, the Company had funds in excess of $250,000 insured by the U.S. Federal Deposit Insurance Corporation, or in excess of similar Deposit Insurance programs outside of the United States, on deposit at various financial institutions. Management believes the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

The Company's trade accounts receivable are generally unsecured and geographically dispersed.

Newly Adopted Accounting Principles and Recent Accounting Pronouncements

Newly Adopted Accounting Principles

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which is intended to improve the accounting for share-based payment transactions. The ASU changes five aspects of the accounting for share-based payment award transactions: (1) accounting for income taxes; (2) classification of excess tax benefits on the statement of cash flows; (3) forfeitures; (4) minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for taxes. The Company adopted ASU 2016-09 effective January 1, 2017. Excess tax benefits for share-based payments are now recognized against income tax expense rather than additional paid-in capital and are included in operating cash flows rather than financing cash flows. The recognition of excess tax benefits has been applied on a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings. As of January 1, 2017, the cumulative effect of adopting ASU 2016-09 was an increase in deferred tax assets of $11.2 million and a decrease in accumulated deficit of $11.2 million as a result of recognizing $27.8 million previously unrecognized excess tax benefits from share-based compensation. The Company will continue to account for forfeitures as they occur. Cash paid by by the Company when directly withholding shares for tax withholding purposes will continue to be classified as a financing activity rather than an operating activity. Additionally, the Company has applied the provisions of this ASU on a prospective basis in the condensed consolidated statements of cash flows and prior periods have not been adjusted.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which amends the existing accounting standards for revenue recognition. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The new revenue recognition standard will be effective for the Company in the first quarter of 2018, with the option to early adopt it in the first quarter of 2017. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (the modified retrospective method). The Company has completed its initial impact assessment and is in the process of developing an implementation plan to include any potential process or system changes; however, the assessment of the impact to the Company’s results of operations, financial position and cash flows as a result of this guidance is ongoing. The Company will adopt this new standard as of January 1, 2018 and currently expects to apply the modified retrospective method, which may result in a cumulative effect adjustment as of the date of adoption. Both the Company’s initial assessment and its selected transition method may change depending on the results of the Company’s final assessment of the impact to its financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which requires most leases (with the exception of leases with terms of less than one year) to be recognized on the balance sheet as an asset and a lease liability. Leases will be classified as an operating lease or a financing lease. Operating leases are expensed using the straight-line method, whereas financing leases will be treated similarly to a capital lease under the current standard. The new standard will be effective for annual and interim periods, within those fiscal years, beginning after December 15, 2018, but early adoption is permitted. The new standard must be presented using the modified retrospective method beginning with the earliest comparative period presented. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice of how certain transactions are classified and presented in the statement of cash flows in accordance with ASC 230. The ASU amends or clarifies guidance on eight specific cash flow issues, some of which include classification on debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and separately identifiable cash flows and application of the predominance principle. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those periods. Early adoption is permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. The Company is currently evaluating the effect of the new standard on its condensed consolidated financial statements and related disclosures, but the Company does not expect the new guidance to have a material impact.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The standard introduces a screen for determining when assets acquired are not a business and clarifies that a business must include, at a minimum, an input and a substantive process that contribute to an output to be considered a business. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

In March 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment by eliminating the requirement to calculate the implied fair value of goodwill (Step 2) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit's carrying amount over its fair value (as determined in Step 1). The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the new guidance to have a material impact on its condensed consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when changes to the terms or conditions of share-based equity awards must be accounted for as modifications. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award are not the same immediately before and after the modification. The guidance is effective prospectively for public business entities for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company does not expect this new guidance to have a material impact on its condensed consolidated financial statements.

Other recent accounting pronouncements issued by the FASB during 2016 and through the six months ended ended June 30, 2017 are not believed to have a material impact on the Company's present or historical consolidated financial statements.

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ORGANIZATION AND BUSINESS (Tables)

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The table below details the calculations of earnings (loss) per share (in thousands, except for share and per share amounts):  

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017			2016
Numerator for basic and diluted EPS – earnings (loss) available to common stockholders	$	649	$	91	$	(12,462	)	$	987
Denominator for basic EPS – weighted average shares	41,244,595		37,065,651		40,849,853			37,016,720
Effect of dilutive securities	574,782		612,469		—			558,677
Denominator for diluted EPS – weighted average shares	41,819,377		37,678,120		40,849,853			37,575,397
Earnings (loss) per share: basic	$	0.02	$	—	$	(0.31	)	$	0.03
Earnings (loss) per share: diluted	$	0.02	$	—	$	(0.31	)	$	0.03

Schedule of Depreciable Lives Used for Classes of Assets

Depreciable lives used by the Company for its classes of assets are as follows:

Freehold Land and Buildings	30 years
Furniture and Fixtures	7 years
Fiber Optic Cable	20 years
Fiber Optic Network Equipment	5 - 15 years
Leasehold Improvements	up to 10 years
Computer Hardware and Software	3-5 years

Schedule of Fair Values of Long-term Debt

The table below presents the fair values for the Company's long-term debt as well as the input level used to determine these fair values as of June 30, 2017 and December 31, 2016. The carrying amounts exclude any debt issuance costs or original issuance discount:

					Fair Value Measurement Using
	Total Carrying Value in Consolidated Balance Sheet				Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (1) (Level 1)
(amounts in thousands)	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
Liabilities not recorded at fair value in the Financial Statements:
Long-term debt, including the current portion:
Term loan	$	696,500	$	425,775	$	699,111	$	425,775
Senior notes	450,000		300,000		479,250		300,000
Total long-term debt, including current portion	$	1,146,500	$	725,775	$	1,178,361	$	725,775

⁽¹⁾ Fair value based on the bid quoted price.

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BUSINESS ACQUISITIONS (Tables)

6 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The table below reflects the Company's provisional estimates of the acquisition date fair values of the assets acquired and liabilities assumed for its acquisitions over the six months endedJune 30, 2017 (amounts in thousands):

Purchase Price	Hibernia			Perseus
Cash paid at closing, including working capital estimate	$	529,600		$	37,500
Common stock (1)	86,092			—
Purchase consideration	$	615,692		$	37,500
Purchase Price Allocation
Assets acquired:
Current assets	$	51,811		$	2,198
Property, plant and equipment	433,248			5,255
Other assets	359			—
Intangible assets - customer lists	166,740			22,500
Intangible assets - tradename	720			—
Intangible assets - other	6,800			—
Goodwill	186,228			23,375
Total assets acquired	845,906			53,328
Liabilities assumed:
Current liabilities	(40,749		)	(9,695		)
Capital leases, long-term portion	—			(1,906		)
Deferred revenue	(163,300		)	(1,248		)
Deferred tax liability	(26,165		)	(2,791		)
Other long-term liabilities	—			(188		)
Total liabilities assumed	(230,214		)	(15,828		)
Net assets acquired	$	615,692		$	37,500

(1) Common stock fair value equals the closing share price of $27.80 less a discount for lack of marketability

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Estimated amortization expense related to these for each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	10,263
2018	20,527
2019	20,167
2020	20,167
2021	20,167
2022 and beyond	96,379
Total	$	187,670

Estimated amortization expense related to intangible assets subject to amortization at June 30, 2017 in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	$	395,472

Summary of Pro Forma Financial Information

The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated as of January 1, 2016.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
(Amounts in thousands, except per share and share data)
Revenue	$	191,350		$	181,106		$	381,572		$	360,298
Net loss	$	(650	)	$	(2,449	)	$	(15,619	)	$	(1,844	)
Earnings (loss) per share:
Basic	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Diluted	$	(0.02	)	$	(0.06	)	$	(0.38	)	$	(0.05	)
Denominator for basic EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592
Denominator for diluted EPS – weighted average shares	41,244,595			40,395,523			40,849,853			40,346,592

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GOODWILL AND INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The change in the carrying amount of goodwill for the six months endedJune 30, 2017 was as follows (amounts in thousands):

	Perseus		Hibernia			Prior Year Acquisitions		Total
Balance at December 31, 2016	$	—	$	—		$	280,593	$	280,593
Initial goodwill associated with current year business combinations	23,375		186,538			—		209,913
Adjustments to current year business combinations	—		(310		)	—		(310		)
Adjustments to prior year business combinations	—		—			—		—
Balance at June 30, 2017	$	23,375	$	186,228		$	280,593	$	490,196

Schedule of Finite-Lived Intangible Assets

The following table summarizes the Company’s intangible assets as of June 30, 2017 and December 31, 2016 (amounts in thousands):

		June 30, 2017						December 31, 2016
	Amortization Period	Gross Asset Cost		Accumulated Amortization		Net Book Value		Gross Asset Cost		Accumulated Amortization		Net Book Value
Customer contracts	3-10 years	$	501,150	$	121,876	$	379,274	$	267,755	$	91,136	$	176,619
Non-compete agreements	3-5 years	4,571		4,467		104		4,572		4,420		152
Point-to-point FCC license fees	3 years	1,697		1,556		141		1,695		1,268		427
Intellectual property	10 years	17,379		2,943		14,436		17,379		2,076		15,303
Trade name	3 years	3,812		2,295		1,517		3,092		1,657		1,435
		$	528,609	$	133,137	$	395,472	$	294,493	$	100,557	$	193,936

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Estimated amortization expense related to these for each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	10,263
2018	20,527
2019	20,167
2020	20,167
2021	20,167
2022 and beyond	96,379
Total	$	187,670

Estimated amortization expense related to intangible assets subject to amortization at June 30, 2017 in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

2017 remaining	$	34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	$	395,472

XML

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

The following table summarizes the Company’s accrued expenses and other current liabilities as of June 30, 2017 and December 31, 2016 (amounts in thousands):

	June 30, 2017		December 31, 2016
Compensation and benefits	$	8,647	$	10,035
Selling, general and administrative	4,840		4,534
Carrier costs	9,838		13,543
Restructuring	7,332		3,247
Fiber pair repurchase	10,000		—
Other	13,929		5,529
	$	54,586	$	36,888

XML

DEFERRED REVENUE (Tables)

6 Months Ended

Jun. 30, 2017

Deferred Revenue Disclosure [Abstract]

Schedule of Deferred Revenue

Prepaid capacity sales and IRUs represent $132.5 million of the total deferred revenue balance as of June 30, 2017 and remaining amortization at June 30, 2017 and in each of the years subsequent to June 30, 2017 is as follows (amounts in thousands):

	Capacity Sales and IRUs
2017 remaining	$	11,488
2018	15,656
2019	11,224
2020	10,894
2021	10,024
2022 and beyond	73,209
	$	132,495

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DEBT (Tables)

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Schedule of Debt

As of June 30, 2017 and December 31, 2016, long-term debt was as follows (amounts in thousands):

	June 30, 2017			December 31, 2016
Term loan	$	696,500		$	425,775
7.875% Senior unsecured notes	450,000			300,000
Revolving line of credit	—			20,000
Total debt obligations	1,146,500			745,775
Unamortized debt issuance costs	(31,662		)	(9,310		)
Unamortized original issuance premium (discount), net	969			(6,957		)
Carrying value of debt	1,115,807			729,508
Less current portion	(7,000		)	(4,300		)
Long-term debt less current portion	$	1,108,807		$	725,208

Schedule of Maturities of Long-term Debt

The aggregate contractual maturities of long-term debt (excluding unamortized debt issuance costs and unamortized OID) were as follows as of June 30, 2017 (amounts in thousands):

	Total debt
2017 remaining	$	3,500
2018	7,000
2019	7,000
2020	7,000
2021	7,000
2022 and beyond	1,115,000
	$	1,146,500

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SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following tables summarize the share-based compensation expense recognized as a component of selling, general and administrative expense in the condensed consolidated statements of operations (amounts in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Stock options	$	334	$	306	$	675	$	732
Restricted stock	4,929		4,194		9,136		5,320
ESPP	63		—		91		—
Total	$	5,326	$	4,500	$	9,902	$	6,052

Schedule of Unrecognized Compensation Cost, Nonvested Awards

The following table summarizes the unrecognized compensation cost and the weighted average period over which the cost is expected to be amortized (amounts in thousands):

	June 30, 2017
	Unrecognized Compensation Cost		Weighted Average Remaining Period to be Recognized (Years)
Time-based stock options	$	2,680	1.86
Time-based restricted stock	29,167		2.58
Performance-based restricted stock	12,948		1.44
Total	$	44,795	2.21

Schedule of Share-based Compensation, Activity

The following tables summarize the stock options and restricted stock granted during the three and six months ended June 30, 2017 and 2016 (amounts in thousands, except shares data):

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Time-based stock options granted	—		11,000		—		155,958
Fair value of stock options granted	$	—	$	89	$	—	$	941
Time-based restricted stock granted	108,800		53,769		693,308		529,303
Fair value of time-based restricted stock granted	$	3,151	$	919	$	19,950	$	7,288

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SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS (Tables)

6 Months Ended

Jun. 30, 2017

Restructuring and Related Activities [Abstract]

Schedule of Restructuring and Related Costs

The total exit costs recorded and paid relating to the acquisitions mentioned above are summarized as follows for the six months ended June 30, 2017 (amounts in thousands):

	Balance, December 31, 2016		Charges and Adjustments		Payments			Balance, June 30, 2017
Employee Termination Benefits	$	42	$	9,692	$	(5,714	)	$	4,020
Contract Terminations:
Lease terminations	859		500		(162		)	1,197
Other contract terminations	2,346		531		(762		)	2,115
	$	3,247	$	10,723	$	(6,638	)	$	7,332

The total exit costs recorded and paid relating to prior year acquisitions are summarized as follows for the six months ended June 30, 2016 (amounts in thousands):

	Balance, December 31, 2015		Charges and Adjustments		Payments			Balance, June 30, 2016
Employee Termination Benefits	$	1,903	$	870	$	(2,643	)	$	130
Contract Terminations:
Lease terminations	1,796		—		(741		)	1,055
Other contract terminations	3,035		625		(403		)	3,257
	$	6,734	$	1,495	$	(3,787	)	$	4,442

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Estimated Annual Commitments Under Contractual Obligations

Estimated annual commitments under contractual obligations are as follows at June 30, 2017 (amounts in thousands):

	Network Supply		Office Space		Capital Leases		Other
2017 remaining	$	65,263	$	2,012	$	917	$	1,254
2018	90,337		4,144		1,277		326
2019	48,139		3,522		223		51
2020	15,018		2,877		—		—
2021	6,420		2,365		—		—
2022 and beyond	43,769		6,987		—		—
	$	268,946	$	21,907	$	2,417	$	1,631

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ORGANIZATION AND BUSINESS - Narrative (Details)		1 Months Ended		3 Months Ended		6 Months Ended			12 Months Ended
	Jan. 01, 2017 USD ($)	Feb. 28, 2017 USD ($)	Dec. 31, 2016 USD ($)	Jun. 30, 2017 USD ($) service	Jun. 30, 2016 USD ($)	Dec. 31, 2017 USD ($)	Jun. 30, 2017 USD ($) service equity_grant segment	Jun. 30, 2016 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Finite-Lived Intangible Assets [Line Items]
Deferred revenue and liabilities							$ (2,509,000)	$ (2,643,000)
Non-cash deferred revenue							(21,346,000)	(3,312,000)
Deferred costs							49,000	(910,000)
Non-cash deferred costs							$ (3,838,000)	(1,322,000)
Number of reporting segments (in segments) | segment							1
Number of operating segments (in segments) | segment							1
Number of primary services | service				6			6
Threshold for fees billed for installation services				$ 500,000			$ 500,000
Number of types of equity grants | equity_grant							3
Allowance for doubtful accounts			$ 2,700,000	3,700,000			$ 3,700,000				$ 2,700,000
Capitalized software costs				400,000	$ 400,000		800,000	800,000
Goodwill impairment							0
Intangible asset impairment							0
Goodwill			280,593,000	490,196,000			490,196,000				280,593,000
Disputed supplier expense			5,800,000	4,400,000			4,400,000				5,800,000
Unamortized debt issuance costs			(9,310,000)	(31,662,000)			(31,662,000)				(9,310,000)
Unamortized debt discount				(1,000,000)			(1,000,000)
Unamortized discount			(6,957,000)	969,000			969,000				(6,957,000)
Cumulative effect of adjustment				(11,247,000)			$ (11,247,000)
Excess tax benefits from stock-based compensation	$ 27,800,000
Minimum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life							3 years
Maximum
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life							7 years
Reclassification Adjustment
Finite-Lived Intangible Assets [Line Items]
Deferred revenue and liabilities								3,300,000
Non-cash deferred revenue							$ 3,300,000
Deferred costs								1,300,000
Non-cash deferred costs							$ 1,300,000
Up-front Payments
Finite-Lived Intangible Assets [Line Items]
Recognition period							20 years
Time-Restricted Stock and Stock Options
Finite-Lived Intangible Assets [Line Items]
Award vesting period							4 years
Senior Notes | 7.875% Senior unsecured notes
Finite-Lived Intangible Assets [Line Items]
Aggregate principal amount			$ 300,000,000.0	$ 150,000,000.0			$ 150,000,000.0				$ 300,000,000.0
Stated percentage rate			7.875%	7.875%			7.875%				7.875%
Period interest is in escrow			60 days
Unamortized debt discount				$ 9,000,000			$ 9,000,000
Customer Contract Portfolios
Finite-Lived Intangible Assets [Line Items]
Goodwill				0			0
Customer Contract Portfolios | Customer Contracts
Finite-Lived Intangible Assets [Line Items]
Aggregate purchase price							37,300,000				$ 41,300,000
Cash paid		$ 14,900,000					18,000,000	$ 6,000,000			$ 20,000,000
Customer Contract Portfolios | Scenario, Forecast | Customer Contracts
Finite-Lived Intangible Assets [Line Items]
Cash paid						$ 3,300,000			$ 22,400,000	$ 21,300,000
Accounting Standards Update 2016-09
Finite-Lived Intangible Assets [Line Items]
Deferred tax assets	(11,200,000)
Accumulated Deficit
Finite-Lived Intangible Assets [Line Items]
Cumulative effect of adjustment				$ (11,247,000)			$ (11,247,000)
Accumulated Deficit | Accounting Standards Update 2016-09
Finite-Lived Intangible Assets [Line Items]
Cumulative effect of adjustment	$ 11,200,000

XML

ORGANIZATION AND BUSINESS - Schedule of Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Numerator for basic and diluted EPS – earnings (loss) available to common stockholders	$ 649	$ 91	$ (12,462)	$ 987
Denominator for basic EPS – weighted average shares (in shares)	41,244,595	37,065,651	40,849,853	37,016,720
Effect of dilutive securities (in shares)	574,782	612,469	0	558,677
Denominator for diluted EPS – weighted average shares (in shares)	41,819,377	37,678,120	40,849,853	37,575,397
Earnings (loss) per share: basic (in dollars per share)	$ 0.02	$ 0.00	$ (0.31)	$ 0.03
Earnings (loss) per share: diluted (in dollars per share)	$ 0.02	$ 0.00	$ (0.31)	$ 0.03
Anti-dilutive items (in shares)			880,000	128,000

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ORGANIZATION AND BUSINESS - Schedule of Depreciable Lives of Assets (Details)	6 Months Ended
	Jun. 30, 2017
Freehold Land and Buildings
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	30 years
Furniture and Fixtures
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	7 years
Fiber Optic Cable
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	20 years
Fiber Optic Network Equipment | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	15 years
Fiber Optic Network Equipment | Minimum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	5 years
Leasehold Improvements | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	10 years
Computer Hardware and Software | Maximum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	5 years
Computer Hardware and Software | Minimum
Property, Plant and Equipment [Line Items]
Property, plant and equipment, useful life	3 years

XML

ORGANIZATION AND BUSINESS - Schedule of Carrying Amount of Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Carrying Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	$ 1,146,500	$ 725,775
Carrying Value | Term loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	696,500	425,775
Carrying Value | Senior notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	450,000	300,000
Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	1,178,361	725,775
Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Fair Value | Term loan
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	699,111	425,775
Unadjusted Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Fair Value | Senior notes
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total long-term debt, including current portion	$ 479,250	$ 300,000

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BUSINESS ACQUISITIONS - Narrative (Details) - USD ($)			1 Months Ended		3 Months Ended		6 Months Ended
	Jun. 23, 2017	Nov. 08, 2016	Jun. 30, 2017	Jan. 31, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate							$ 552,500,000	$ 13,751,000
Amortization of intangible assets					$ 16,600,000	$ 10,200,000	32,600,000	19,400,000
Goodwill			$ 490,196,000		490,196,000		490,196,000		$ 280,593,000
Business combination, integration related costs					2,300,000	$ 1,100,000	10,400,000	$ 2,400,000
Hibernia
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate				$ 529,600,000
Cash acquired				$ 14,600,000
Consideration transferred (in shares)				3,329,872
Total common stock consideration		$ 75,000,000		$ 86,092,000
Goodwill			186,228,000	186,228,000	186,228,000		186,228,000		0
Goodwill expected to be deductible for tax purposes				$ 0
Perseus Telecom
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate			37,500,000
Total common stock consideration			0
Capital leases			1,900,000
Portion of initial cash consideration			4,000,000
Goodwill			$ 23,375,000		23,375,000		23,375,000		$ 0
Hibernia and Perseus
Business Acquisition [Line Items]
Amortization of intangible assets					$ 4,600,000		$ 9,100,000
Pivotal Global Capacity
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate	$ 100,000,000
Consideration transferred (in shares)	1,850,000
Customer relationships | Hibernia
Business Acquisition [Line Items]
Weighted-average useful life				10 years
Customer relationships | Perseus Telecom
Business Acquisition [Line Items]
Weighted-average useful life			8 years
Trademarks | Hibernia
Business Acquisition [Line Items]
Weighted-average useful life				2 years
IRU's | Hibernia
Business Acquisition [Line Items]
Weighted-average useful life				10 years

XML

BUSINESS ACQUISITIONS - Schedule of Acquisition Date Fair Values (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended		6 Months Ended
	Nov. 08, 2016	Jun. 30, 2017	Jan. 31, 2017	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate				$ 552,500	$ 13,751
Goodwill		$ 490,196		490,196		$ 280,593
Hibernia
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate			$ 529,600
Common stock	$ 75,000		86,092
Purchase consideration			615,692
Current assets			51,811
Property, plant and equipment			433,248
Other assets			359
Goodwill		186,228	186,228	186,228		0
Total assets acquired			845,906
Current liabilities			(40,749)
Capital leases, long-term portion			0
Deferred revenue			(163,300)
Deferred tax liability			(26,165)
Other long-term liabilities			0
Total liabilities assumed			(230,214)
Net assets acquired			$ 615,692
Share price (in dollars per share)			$ 27.80
Perseus Telecom
Business Acquisition [Line Items]
Cash paid at closing, including working capital estimate		37,500
Common stock		0
Purchase consideration		37,500
Current assets		2,198		2,198
Property, plant and equipment		5,255		5,255
Other assets		0		0
Goodwill		23,375		23,375		$ 0
Total assets acquired		53,328		53,328
Current liabilities		(9,695)		(9,695)
Capital leases, long-term portion		(1,906)		(1,906)
Deferred revenue		(1,248)		(1,248)
Deferred tax liability		(2,791)		(2,791)
Other long-term liabilities		(188)		(188)
Total liabilities assumed		(15,828)		(15,828)
Net assets acquired		37,500		37,500
Customer Lists | Hibernia
Business Acquisition [Line Items]
Intangible assets			$ 166,740
Customer Lists | Perseus Telecom
Business Acquisition [Line Items]
Intangible assets		22,500		22,500
Trade name | Hibernia
Business Acquisition [Line Items]
Intangible assets			720
Trade name | Perseus Telecom
Business Acquisition [Line Items]
Intangible assets		0		0
Other | Hibernia
Business Acquisition [Line Items]
Intangible assets			$ 6,800
Other | Perseus Telecom
Business Acquisition [Line Items]
Intangible assets		$ 0		$ 0

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BUSINESS ACQUISITIONS - Schedule of Estimated Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Business Acquisition [Line Items]
2017 remaining	$ 34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	395,472	$ 193,936
Hibernia and Perseus
Business Acquisition [Line Items]
2017 remaining	10,263
2018	20,527
2019	20,167
2020	20,167
2021	20,167
2022 and beyond	96,379
Total	$ 187,670

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BUSINESS ACQUISITIONS - Schedule of Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Business Combinations [Abstract]
Revenue	$ 191,350	$ 181,106	$ 381,572	$ 360,298
Net loss	$ (650)	$ (2,449)	$ (15,619)	$ (1,844)
Earnings (loss) per share:
Basic (in dollars per share)	$ (0.02)	$ (0.06)	$ (0.38)	$ (0.05)
Diluted (in dollars per share)	$ (0.02)	$ (0.06)	$ (0.38)	$ (0.05)
Denominator for basic EPS – weighted average shares (in shares)	41,244,595	40,395,523	40,849,853	40,346,592
Denominator for diluted EPS – weighted average shares (in shares)	41,244,595	40,395,523	40,849,853	40,346,592

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GOODWILL AND INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 490,196		$ 490,196		$ 280,593
Intangible assets, net	395,472		395,472		$ 193,936
Amortization of intangible assets	$ 16,600	$ 10,200	$ 32,600	$ 19,400

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Carrying Amount of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Goodwill [Roll Forward]
Goodwill beginning of period	$ 280,593
Initial goodwill associated with current year business combinations	209,913
Adjustments to current year business combinations	(310)
Adjustments to prior year business combinations	0
Goodwill end of period	490,196
Perseus
Goodwill [Roll Forward]
Goodwill beginning of period	0
Initial goodwill associated with current year business combinations	23,375
Adjustments to current year business combinations	0
Adjustments to prior year business combinations	0
Goodwill end of period	23,375
Hibernia
Goodwill [Roll Forward]
Goodwill beginning of period	0
Initial goodwill associated with current year business combinations	186,538
Adjustments to current year business combinations	(310)
Adjustments to prior year business combinations	0
Goodwill end of period	186,228
Prior Year Acquisitions
Goodwill [Roll Forward]
Goodwill beginning of period	280,593
Initial goodwill associated with current year business combinations	0
Adjustments to current year business combinations	0
Adjustments to prior year business combinations	0
Goodwill end of period	$ 280,593

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Goodwill And Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Schedule of Intangible Assets [Line Items]
Gross Asset Cost	$ 528,609	$ 294,493
Accumulated Amortization	133,137	100,557
Total	$ 395,472	193,936
Minimum
Schedule of Intangible Assets [Line Items]
Amortization Period	3 years
Maximum
Schedule of Intangible Assets [Line Items]
Amortization Period	7 years
Customer contracts
Schedule of Intangible Assets [Line Items]
Gross Asset Cost	$ 501,150	267,755
Accumulated Amortization	121,876	91,136
Total	$ 379,274	$ 176,619
Customer contracts | Minimum
Schedule of Intangible Assets [Line Items]
Amortization Period	3 years	3 years
Customer contracts | Maximum
Schedule of Intangible Assets [Line Items]
Amortization Period	10 years	10 years
Non-compete agreements
Schedule of Intangible Assets [Line Items]
Gross Asset Cost	$ 4,571	$ 4,572
Accumulated Amortization	4,467	4,420
Total	$ 104	$ 152
Non-compete agreements | Minimum
Schedule of Intangible Assets [Line Items]
Amortization Period	3 years	3 years
Non-compete agreements | Maximum
Schedule of Intangible Assets [Line Items]
Amortization Period	5 years	5 years
Point-to-point FCC license fees
Schedule of Intangible Assets [Line Items]
Amortization Period	3 years	3 years
Gross Asset Cost	$ 1,697	$ 1,695
Accumulated Amortization	1,556	1,268
Total	$ 141	$ 427
Intellectual property
Schedule of Intangible Assets [Line Items]
Amortization Period	10 years	10 years
Gross Asset Cost	$ 17,379	$ 17,379
Accumulated Amortization	2,943	2,076
Total	$ 14,436	$ 15,303
Trade name
Schedule of Intangible Assets [Line Items]
Amortization Period	3 years	3 years
Gross Asset Cost	$ 3,812	$ 3,092
Accumulated Amortization	2,295	1,657
Total	$ 1,517	$ 1,435

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GOODWILL AND INTANGIBLE ASSETS - Schedule of Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
2017 remaining	$ 34,657
2018	63,670
2019	58,454
2020	55,436
2021	53,880
2022 and beyond	129,375
Total	$ 395,472	$ 193,936

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Compensation and benefits	$ 8,647	$ 10,035
Selling, general and administrative	4,840	4,534
Carrier costs	9,838	13,543
Restructuring	7,332	3,247
Fiber pair repurchase	10,000	0
Other	13,929	5,529
Accrued expenses and other current liabilities	$ 54,586	$ 36,888

XML

DEFERRED REVENUE - Narrative (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Deferred Revenue Arrangement [Line Items]
Total deferred revenue	$ 167,000
Prepaid capacity sales and IRUs
Deferred Revenue Arrangement [Line Items]
Total deferred revenue	$ 132,495

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DEFERRED REVENUE - Schedule of Estimated Amortization (Details) $ in Thousands	Jun. 30, 2017 USD ($)
Deferred Revenue Arrangement [Line Items]
Total deferred revenue	$ 167,000
Capacity Sales and IRUs
Deferred Revenue Arrangement [Line Items]
2017 remaining	11,488
2018	15,656
2019	11,224
2020	10,894
2020	10,024
2022 and beyond	73,209
Total deferred revenue	$ 132,495

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DEBT - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Total debt obligations	$ 1,146,500	$ 745,775
Unamortized debt issuance costs	(31,662)	(9,310)
Unamortized original issuance premium (discount), net	969	(6,957)
Unamortized original issuance premium (discount), net	1,115,807	729,508
Carrying value of debt	(7,000)	(4,300)
Less current portion	1,108,807	725,208
Term loan | Credit Agreement January 2017
Debt Instrument [Line Items]
Total debt obligations	696,500	425,775
Senior Notes | 7.875% Senior unsecured notes
Debt Instrument [Line Items]
Total debt obligations	450,000	300,000
Revolving Credit Facility | Revolving line of credit | Credit Agreement January 2017
Debt Instrument [Line Items]
Total debt obligations	$ 0	$ 20,000

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DEBT - Narrative (Details)			3 Months Ended		6 Months Ended
	Jul. 10, 2017	Jan. 09, 2017 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2016 USD ($)	Dec. 31, 2016 USD ($)	Oct. 22, 2015 USD ($)
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage			5.00%		5.00%		5.80%
Debt premium			$ (1,000,000)		$ (1,000,000)
Unamortized discount			969,000		969,000		$ (6,957,000)
Payments of debt issuance costs					27,730,000	$ 904,000
Unamortized debt issuance costs			(31,662,000)		(31,662,000)		(9,310,000)
Amortization of debt issuance costs			900,000	$ 400,000	1,646,000	850,000
Debt discount amortization			200,000	18,000	499,000	341,000
Loss on debt extinguishment			0	$ 1,632,000	5,659,000	$ 1,632,000
Total debt obligations			1,146,500,000		1,146,500,000		745,775,000
Credit Agreement January 2017
Debt Instrument [Line Items]
Increase in borrowing capacity limit		$ 150,000,000.0
Credit Agreement January 2017 | Term Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		700,000,000.0
Original issuance discount		(3,500,000)	(5,000,000)		(5,000,000)
Quarterly installments		$ 1,800,000.0			0
Percentage of excess cash flow above the maximum net secured leverage ratio		50.00%
Prepayment penalty period		6 years
Prepayment penalty percentage of outstanding loan		1.00%
Debt issuance costs		$ 23,500,000
Debt premium			9,000,000		9,000,000
Payments of debt issuance costs		$ 24,800,000
Credit Agreement January 2017 | Term Loan | Base Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.00%
Credit Agreement January 2017 | Term Loan | Eurodollar
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		4.00%
Credit Agreement January 2017 | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 75,000,000.0
Increase in borrowing capacity limit		$ 25,000,000.0
Consolidated net secured leverage ratio		0.3
Credit Agreement January 2017 | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		2.50%
Credit Agreement January 2017 | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate		3.50%
Credit Agreement January 2017 | Letter of Credit
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 25,000,000.0
7.875% Senior unsecured notes | Senior Notes
Debt Instrument [Line Items]
Aggregate principal amount			$ 150,000,000.0		$ 150,000,000.0		$ 300,000,000.0
Stated percentage rate			7.875%		7.875%		7.875%
Debt issuance costs			$ 2,900,000		$ 2,900,000		$ 9,700,000
Debt premium			9,000,000		9,000,000
Total debt obligations			$ 450,000,000		$ 450,000,000		300,000,000
Senior Notes Offering, December 2024 Incurred in 2016 | Senior Notes
Debt Instrument [Line Items]
Debt issuance costs							500,000
Credit Agreement, October 2015
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity								$ 400,000,000.0
Credit Agreement, October 2015 | 7.875% Senior note
Debt Instrument [Line Items]
Total debt obligations							20,000,000
Line of credit facility, remaining borrowing capacity							29,500,000
Credit Agreement, October 2015 | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity								50,000,000.0
Credit Agreement, October 2015 | Letter of Credit
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity								15,000,000.0
Credit Agreement, October 2015 | Previous Term Loan Facility
Debt Instrument [Line Items]
Original issuance discount							$ (8,000,000)
Unamortized debt issuance costs		$ (6,300,000)
Credit Agreement, October 2015 | Swingline Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity								$ 10,000,000.0
Minimum | Credit Agreement January 2017 | Eurodollar
Debt Instrument [Line Items]
Debt instrument, interest rate, effective percentage		1.00%
Subsequent Event | Repricing Amendment, Tranche B Term Loan | Revolving Credit Facility
Debt Instrument [Line Items]
Percentage of soft call protection	1.00%
Subsequent Event | Repricing Amendment, Tranche B Term Loan | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	2.25%
Subsequent Event | Repricing Amendment, Tranche B Term Loan | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	3.25%
Subsequent Event | Minimum | Repricing Amendment, Tranche B Term Loan | Revolving Credit Facility | Base Rate
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	2.00%
Subsequent Event | Minimum | Repricing Amendment, Tranche B Term Loan | Revolving Credit Facility | Eurodollar
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	3.00%

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DEBT - Schedule of Maturities of Long-term Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2017 remaining	$ 3,500
2018	7,000
2019	7,000
2020	7,000
2021	7,000
2022 and beyond	1,115,000
Unamortized original issuance premium (discount), net	$ 1,146,500	$ 745,775

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SHARE-BASED COMPENSATION - Narrative (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	9,500,000		9,500,000
Awards outstanding and issued (in shares)	7,977,987		7,977,987
Unrecognized compensation cost	$ 44,795,000		$ 44,795,000
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price of common stock, percent			85.00%
Number of shares available for grant (in shares)	452,934		452,934
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of shares granted	$ 0	$ 89,000	$ 0	$ 941,000
Performance Shares | 2015 Performance Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of shares granted			17,400,000		$ 17,400,000
Allocated share-based compensation expense	1,700,000	$ 0	$ 2,800,000	$ 0
Stock Option 25
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, vested and expected to vest, outstanding, weighted average remaining contractual term			4 years
Stock Option 25 | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, vested and expected to vest, outstanding, weighted average remaining contractual term			4 years
Stock Option 75
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, vested and expected to vest, outstanding, weighted average remaining contractual term			3 years
Percent of awards vesting after initial year			75.00%
Stock Option 75 | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options, vested and expected to vest, outstanding, weighted average remaining contractual term			3 years
Percent of awards vesting after initial year			75.00%
Periodic Vesting
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Purchase price of common stock, percent			100.00%
Periodic Vesting | Employee Director Consultant Stock Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Term of award			10 years
Periodic Vesting | Stock Option 25
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage			25.00%
Periodic Vesting | Stock Option 25 | Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage			25.00%
2014 Performance Awards | Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	100,000		$ 100,000
Fair value of shares granted					$ 8,500,000	$ 8,500,000
2015 Performance Awards | Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost	$ 12,800,000		$ 12,800,000

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SHARE-BASED COMPENSATION - Schedule of Share-based Compensation Expense (Details) - Selling, general and administrative expenses - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	$ 5,326	$ 4,500	$ 9,902	$ 6,052
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	334	306	675	732
Restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	4,929	4,194	9,136	5,320
ESPP
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated share-based compensation expense	$ 63	$ 0	$ 91	$ 0

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SHARE-BASED COMPENSATION - Schedule of Unrecognized Compensation Expense (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2017 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized Compensation Cost	$ 44,795
Weighted Average Remaining Period to be Recognized (Years)	2 years 2 months 16 days
Time-based stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, Time-based stock options	$ 2,680
Weighted Average Remaining Period to be Recognized (Years)	1 year 10 months 10 days
Time-based restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, Time-based and Performance-based restricted stock	$ 29,167
Weighted Average Remaining Period to be Recognized (Years)	2 years 6 months 29 days
Performance-based restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, Time-based and Performance-based restricted stock	$ 12,948
Weighted Average Remaining Period to be Recognized (Years)	1 year 5 months 9 days

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SHARE-BASED COMPENSATION - Schedule of Stock Options (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Time-based stock options granted (in shares)	0	11,000	0	155,958
Fair value of shares granted	$ 0	$ 89	$ 0	$ 941
Time-based restricted stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of shares granted	$ 3,151	$ 919	$ 19,950	$ 7,288
Time-based restricted stock granted (in shares)	108,800	53,769	693,308	529,303

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INCOME TAXES - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Tax benefit	$ 2,615	$ (5)	$ 14,071	$ (409)
Net discrete tax benefits primarily attributable to excess tax benefits			$ 3,600

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SEVERANCE, RESTRUCTURING AND OTHER EXIT COSTS - Schedule of Exit Costs (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Restructuring Reserve [Roll Forward]
Beginning balance	$ 3,247	$ 6,734
Charges and Adjustments	10,723	1,495
Payments	(6,638)	(3,787)
Ending balance	7,332	4,442
Employee Termination Benefits
Restructuring Reserve [Roll Forward]
Beginning balance	42	1,903
Charges and Adjustments	9,692	870
Payments	(5,714)	(2,643)
Ending balance	4,020	130
Lease terminations
Restructuring Reserve [Roll Forward]
Beginning balance	859	1,796
Charges and Adjustments	500	0
Payments	(162)	(741)
Ending balance	1,197	1,055
Other contract terminations
Restructuring Reserve [Roll Forward]
Beginning balance	2,346	3,035
Charges and Adjustments	531	625
Payments	(762)	(403)
Ending balance	$ 2,115	$ 3,257

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COMMITMENTS AND CONTINGENCIES - Commitment Obligations (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017 USD ($) office	Jun. 30, 2016 USD ($)	Jun. 30, 2017 USD ($) office category	Jun. 30, 2016 USD ($)
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
2017 remaining	$ 917		$ 917
2018	1,277		1,277
2019	223		223
2020	0		0
2021	0		0
2022 and beyond	0		0
Capital lease obligation	2,417		2,417
Office Space
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity
2017 remaining	2,012		2,012
2018	4,144		4,144
2019	3,522		3,522
2020	2,877		2,877
2021	2,365		2,365
2022 and beyond	6,987		6,987
Operating lease obligation	21,907		21,907
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Office facility rent expense	1,000	$ 900	2,100	$ 1,900
Other
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity
2017 remaining	1,254		1,254
2018	326		326
2019	51		51
2020	0		0
2021	0		0
2022 and beyond	0		0
Operating lease obligation	1,631		1,631
Network Supply
Contractual Obligation, Fiscal Year Maturity
2017 remaining	65,263		65,263
2018	90,337		90,337
2019	48,139		48,139
2020	15,018		15,018
2021	6,420		6,420
2022 and beyond	43,769		43,769
Contractual obligation	$ 268,946		$ 268,946
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Contractual obligation, number of key categories | category			2
Contract term			1 year
North America
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Number of offices | office	14		14
Europe
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Number of offices | office	7		7
India
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Number of offices | office	1		1
Hong Kong
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity
Number of offices | office	1		1