GTT Communications, Inc. | ||
(Exact Name of Registrant as Specified in its Charter) |
Delaware | 001-35965 | 20-2096338 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
7900 Tysons One Place Suite 1450 McLean, Virginia 22102 | ||
(Address of principal executive offices) |
Item 2.02. | Results of Operations and Financial Condition |
Item 9.01 | Financial Statements and Exhibits |
Exhibit | ||
Number | Description | |
Press Release dated May 3, 2018 |
Date: | May 3, 2018 | |||
GTT Communications, Inc. | ||||
By: | /s/ Michael T. Sicoli | |||
Michael T. Sicoli | ||||
Chief Financial Officer |
Exhibit Number | Description | |
99.1 | Press Release dated May 3, 2018 |
• | Revenue of $260.7 million grew 40.2% over 1Q17, and grew 4.6% over 4Q17. |
• | Net loss was $30.7 million, compared to net loss of $13.1 million in 1Q17 and net loss of $49.5 million in 4Q17. 1Q18 net loss was primarily the result of several non-recurring costs, including $7.8 million in exit, transaction and integration costs related to the Custom Connect, Accelerated Connections and Interoute acquisitions, and $17.2 million expense related to a foreign currency hedge entered into in anticipation of the Interoute acquisition. 4Q17 net loss included several significant nonrecurring costs, primarily related to taxes. |
• | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) of $62.7 million grew 23.4% over 1Q17, and grew 3.1% over 4Q17. Adjusted EBITDA margin was 24.1% compared to 27.3% in 1Q17 and 24.4% in 4Q17. The decline in Adjusted EBITDA margin compared to last year is due to the Global Capacity acquisition, which had lower standalone margins; on a pro forma basis, Adjusted EBITDA margin actually increased (see page 9). |
• | Capital expenditures were $13.2 million (5.1% of revenue) compared to $8.5 million in 1Q17 (4.6% of revenue) and $15.2 million in 4Q17 (6.1% of revenue). |
• | Using constant currency (i) 1Q18 revenue and Adjusted EBITDA would have been lower than reported by $4.3 million and $0.6 million, respectively, compared to 1Q17, and (ii) 1Q18 revenue and Adjusted EBITDA would have been lower than reported by $1.6 million and $0.3 million, respectively, compared to 4Q17. |
• | 1Q18 revenue and Adjusted EBITDA grew 6.7% and 13.7%, respectively, over 1Q17. |
• | 1Q18 revenue and Adjusted EBITDA grew 4.0% and 2.6%, respectively, over 4Q17. |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue: | |||||||
Telecommunications services | $ | 260.7 | $ | 186.0 | |||
Operating expenses: | |||||||
Cost of telecommunications services | 141.5 | 95.0 | |||||
Selling, general and administrative expenses | 68.3 | 52.9 | |||||
Severance, restructuring and other exit costs | 1.9 | 10.7 | |||||
Depreciation and amortization | 39.8 | 30.4 | |||||
Total operating expenses | 251.5 | 189.0 | |||||
Operating income (loss) | 9.2 | (3.0 | ) | ||||
Other expense: | |||||||
Interest expense, net | (20.9 | ) | (15.8 | ) | |||
Loss on debt extinguishment | — | (5.7 | ) | ||||
Other expense, net | (17.4 | ) | (0.1 | ) | |||
Total other expense | (38.3 | ) | (21.6 | ) | |||
Loss before income taxes | (29.1 | ) | (24.6 | ) | |||
Provision for (benefit from) income taxes | 1.6 | (11.5 | ) | ||||
Net loss | $ | (30.7 | ) | $ | (13.1 | ) | |
Loss per share: | |||||||
Basic | $ | (0.69 | ) | $ | (0.32 | ) | |
Diluted | $ | (0.69 | ) | $ | (0.32 | ) | |
Weighted average shares: | |||||||
Basic | 44,632,365 | 40,410,554 | |||||
Diluted | 44,632,365 | 40,410,554 |
March 31, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 54.4 | $ | 101.2 | |||
Accounts receivable, net of allowances of $4.4 and $5.1, respectively | 98.2 | 102.8 | |||||
Prepaid and other current assets | 27.8 | 24.1 | |||||
Total current assets | 180.4 | 228.1 | |||||
Property and equipment, net | 495.5 | 499.3 | |||||
Intangible assets, net | 414.1 | 417.1 | |||||
Goodwill | 675.6 | 644.5 | |||||
Other long-term assets | 16.5 | 9.2 | |||||
Total assets | $ | 1,782.1 | $ | 1,798.2 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable, accrued expenses and other current liabilities | $ | 114.7 | $ | 111.5 | |||
Acquisition earn-outs and holdbacks | 11.3 | 14.0 | |||||
Current portion of capital lease obligations | 1.0 | 1.5 | |||||
Current portion of long-term debt | 7.0 | 7.0 | |||||
Deferred revenue | 57.0 | 53.7 | |||||
Total current liabilities | 191.0 | 187.7 | |||||
Capital lease obligations, long-term portion | 0.1 | 0.3 | |||||
Long-term debt | 1,235.7 | 1,236.5 | |||||
Deferred revenue, long-term portion | 106.7 | 108.0 | |||||
Deferred tax liabilities | 36.1 | 26.3 | |||||
Other long-term liabilities | 5.2 | 8.0 | |||||
Total liabilities | 1,574.8 | 1,566.8 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Total stockholders’ equity | 207.3 | 231.4 | |||||
Total liabilities and stockholders’ equity | $ | 1,782.1 | $ | 1,798.2 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (30.7 | ) | $ | (13.1 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 39.8 | 30.4 | |||||
Share-based compensation | 5.9 | 4.6 | |||||
Debt (premium) discount amortization | (0.2 | ) | 0.2 | ||||
Loss on debt extinguishment | — | 5.7 | |||||
Amortization of debt issuance costs | 1.2 | 0.7 | |||||
Change in fair value of derivative financial liability | 17.2 | — | |||||
Excess tax benefit and deferred income taxes | 0.4 | (12.9 | ) | ||||
Change in fair value of acquisition earn-out | 0.1 | — | |||||
Non-cash deferred revenue | (2.7 | ) | (11.7 | ) | |||
Non-cash deferred costs | 0.4 | 0.9 | |||||
Changes in operating assets and liabilities, net of acquisitions: | (19.2 | ) | (2.5 | ) | |||
Net cash provided by operating activities | 12.2 | 2.3 | |||||
Cash flows from investing activities: | |||||||
Acquisition of businesses, net of cash acquired | (33.6 | ) | (513.1 | ) | |||
Purchase of customer contracts | — | (3.9 | ) | ||||
Purchases of property and equipment | (13.2 | ) | (8.5 | ) | |||
Net cash used in investing activities | (46.8 | ) | (525.5 | ) | |||
Cash flows from financing activities: | |||||||
Repayment of revolving line of credit | — | (20.0 | ) | ||||
Proceeds from term loan | — | 696.5 | |||||
Repayment of term loan | (1.8 | ) | (427.5 | ) | |||
Payment of earn-out and holdbacks | (5.7 | ) | (1.8 | ) | |||
Debt issuance costs | — | (24.8 | ) | ||||
Repayment of capital leases | (0.7 | ) | (0.3 | ) | |||
Proceeds from issuance of common stock under ESPP | 0.1 | 0.1 | |||||
Tax withholding related to the vesting of restricted stock units | (5.2 | ) | (1.4 | ) | |||
Exercise of stock options | 0.6 | 0.8 | |||||
Net cash (used in) provided by financing activities | (12.7 | ) | 221.6 | ||||
Effect of exchange rate changes on cash | 0.5 | 0.6 | |||||
Net decrease in cash, cash equivalents, and restricted cash | (46.8 | ) | (301.0 | ) | |||
Cash, cash equivalents, and restricted cash at beginning of period | 101.2 | 334.0 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 54.4 | $ | 33.0 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Adjusted EBITDA | |||||||
Net loss | $ | (30.7 | ) | $ | (13.1 | ) | |
Provision for (benefit from) income taxes | 1.6 | (11.5 | ) | ||||
Interest and other expense, net | 38.3 | 15.9 | |||||
Loss on debt extinguishment | — | 5.7 | |||||
Depreciation and amortization | 39.8 | 30.4 | |||||
Severance, restructuring and other exit costs | 1.9 | 10.7 | |||||
Transaction and integration costs | 5.9 | 8.1 | |||||
Share-based compensation | 5.9 | 4.6 | |||||
Adjusted EBITDA | 62.7 | 50.8 | |||||
Purchases of property and equipment | (13.2 | ) | (8.5 | ) | |||
Adjusted EBITDA less capital expenditures | $ | 49.5 | $ | 42.3 |
($ in millions) | Three Months Ended March 31, | ||||||
2018 | 2017 | ||||||
Revenue | |||||||
GTT as reported | $ | 260.7 | $ | 186.0 | |||
Global Capacity, net of pro forma adjustments (1) | — | 54.3 | |||||
Pro Forma Revenue | $ | 260.7 | $ | 240.3 | |||
Pro Forma % Growth | 8.5 | % | |||||
Pro Forma % Growth (Constant Currency) | 6.7 | % | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 62.7 | $ | 50.8 | |||
Global Capacity, net of pro forma adjustments (2) | — | 3.8 | |||||
Pro Forma Adjusted EBITDA | $ | 62.7 | $ | 54.6 | |||
Pro Forma Adjusted EBITDA Margin % | 24.1 | % | 22.7 | % | |||
Pro Forma % Growth | 14.8 | % | |||||
Pro Forma % Growth (Constant Currency) | 13.7 | % |
(1) Pro forma adjustments include revenue recognized by acquired companies from GTT, net of revenue recognized by GTT from acquired companies prior to their respective close dates, as well as adjustments in deferred revenue from acquired companies. | ||||
(2) Pro forma adjustments include net adjustments in deferred revenue and deferred costs from acquired company. |
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