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 November 8, 2018 |
Date: | November 8, 2018 | |||
GTT Communications, Inc. | ||||
By: | /s/ Michael T. Sicoli | |||
Michael T. Sicoli | ||||
Chief Financial Officer |
Exhibit Number | Description | |
99.1 | Press Release dated November 8, 2018 |
• | Revenue of $448.6 million grew 121.4% over 3Q17, and grew 37.3% over 2Q18. |
• | Net loss was $23.4 million, compared to net loss of $9.5 million in 3Q17, and net loss of $136.3 million in 2Q18. 3Q18 net loss was primarily the result of several non-recurring costs related to the Interoute acquisition, including $26.2 million in exit, transaction and integration costs. 2Q18 net loss was also primarily due to several non-recurring costs related to Interoute, including $13.7 million in exit, transaction and integration costs, $13.8 million loss on extinguishment of debt, and $88.6 million of expense related to a foreign currency hedge which was settled at closing. |
• | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) of $108.4 million grew 92.9% over 3Q17, and grew 44.7% over 2Q18. Adjusted EBITDA margin was 24.2% compared to 27.7% in 3Q17 and 22.9% in 2Q18. |
• | Capital expenditures were $28.9 million (6.4% of revenue) compared to $9.1 million in 3Q17 (4.5% of revenue) and $19.3 million in 2Q18 (5.9% of revenue). |
• | Using constant currency (i) 3Q18 revenue and Adjusted EBITDA would have been higher than reported by $2.5 million and $0.6 million, respectively, compared to 3Q17, and (ii) 3Q18 revenue and Adjusted |
• | 3Q18 revenue and Adjusted EBITDA grew 1.4% and 2.3%, respectively, over 3Q17. |
• | 3Q18 revenue and Adjusted EBITDA declined 1.2% and grew 2.0%, respectively, compared to 2Q18. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Telecommunications services | $ | 448.6 | $ | 202.6 | $ | 1,036.0 | $ | 578.6 | |||||||
Operating expenses: | |||||||||||||||
Cost of telecommunications services | 247.4 | 103.8 | 568.2 | 296.1 | |||||||||||
Selling, general and administrative expenses | 112.7 | 52.0 | 270.7 | 151.6 | |||||||||||
Severance, restructuring and other exit costs | 15.5 | 11.1 | 22.7 | 21.8 | |||||||||||
Depreciation and amortization | 58.5 | 32.8 | 146.5 | 94.7 | |||||||||||
Total operating expenses | 434.1 | 199.7 | 1,008.1 | 564.2 | |||||||||||
Operating income | 14.5 | 2.9 | 27.9 | 14.4 | |||||||||||
Other expense: | |||||||||||||||
Interest expense, net | (47.6 | ) | (18.3 | ) | (98.7 | ) | (50.7 | ) | |||||||
Loss on debt extinguishment | — | (3.0 | ) | (13.8 | ) | (8.6 | ) | ||||||||
Other expense, net | 8.1 | 0.2 | (106.9 | ) | 0.2 | ||||||||||
Total other expense | (39.5 | ) | (21.1 | ) | (219.4 | ) | (59.1 | ) | |||||||
Loss before income taxes | (25.0 | ) | (18.2 | ) | (191.5 | ) | (44.7 | ) | |||||||
Benefit from income taxes | (1.6 | ) | (8.7 | ) | (1.1 | ) | (22.7 | ) | |||||||
Net loss | $ | (23.4 | ) | $ | (9.5 | ) | $ | (190.4 | ) | $ | (22.0 | ) | |||
Loss per share: | |||||||||||||||
Basic | $ | (0.43 | ) | $ | (0.23 | ) | $ | (3.87 | ) | $ | (0.53 | ) | |||
Diluted | $ | (0.43 | ) | $ | (0.23 | ) | $ | (3.87 | ) | $ | (0.53 | ) | |||
Weighted average shares: | |||||||||||||||
Basic | 54,671,787 | 41,762,693 | 49,210,929 | 41,160,317 | |||||||||||
Diluted | 54,671,787 | 41,762,693 | 49,210,929 | 41,160,317 |
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 47.7 | $ | 101.2 | |||
Accounts receivable, net of allowances of $4.2 and $5.1, respectively | 254.1 | 102.8 | |||||
Prepaid and other current assets | 68.8 | 24.1 | |||||
Total current assets | 370.6 | 228.1 | |||||
Property and equipment, net | 1,904.6 | 499.3 | |||||
Intangible assets, net | 564.6 | 417.1 | |||||
Goodwill | 1,666.8 | 644.5 | |||||
Other long-term assets | 86.6 | 9.2 | |||||
Total assets | $ | 4,593.2 | $ | 1,798.2 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable, accrued expenses and other current liabilities | $ | 294.4 | $ | 111.5 | |||
Acquisition holdbacks | 8.9 | 14.0 | |||||
Current portion of capital lease obligations | 6.8 | 1.5 | |||||
Current portion of long-term debt | 40.9 | 7.0 | |||||
Deferred revenue | 191.5 | 53.7 | |||||
Total current liabilities | 542.5 | 187.7 | |||||
Capital lease obligations, long-term portion | 36.2 | 0.3 | |||||
Long-term debt | 3,115.5 | 1,236.5 | |||||
Deferred revenue, long-term portion | 268.6 | 108.0 | |||||
Deferred tax liabilities | 122.7 | 26.3 | |||||
Other long-term liabilities | 31.7 | 8.0 | |||||
Total liabilities | 4,117.2 | 1,566.8 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Total stockholders’ equity | 476.0 | 231.4 | |||||
Total liabilities and stockholders’ equity | $ | 4,593.2 | $ | 1,798.2 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Net loss | $ | (23.4 | ) | $ | (9.5 | ) | $ | (190.4 | ) | $ | (22.0 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 58.5 | 32.8 | 146.5 | 94.7 | |||||||||||
Share-based compensation | 9.3 | 6.1 | 23.9 | 16.0 | |||||||||||
Debt discount amortization | 1.7 | — | 1.9 | 0.5 | |||||||||||
Loss on debt extinguishment | — | 2.9 | 13.8 | 8.6 | |||||||||||
Amortization of debt issuance costs | 1.0 | 0.9 | 3.4 | 2.6 | |||||||||||
Change in fair value of derivative financial liability | (8.4 | ) | — | 106.9 | — | ||||||||||
Excess tax benefit and deferred income taxes | 1.9 | (10.2 | ) | 1.4 | (23.7 | ) | |||||||||
Deferred revenue | (8.7 | ) | (9.4 | ) | (11.2 | ) | (28.1 | ) | |||||||
Changes in operating assets and liabilities, net of acquisitions: | (9.7 | ) | 7.3 | (46.2 | ) | (1.5 | ) | ||||||||
Net cash provided by operating activities | 22.2 | 20.9 | 50.0 | 47.1 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisition of businesses, net of cash acquired | — | (100.3 | ) | (2,206.7 | ) | (652.8 | ) | ||||||||
Purchase of customer contracts | — | — | — | (14.9 | ) | ||||||||||
Settlement of deal-contingent foreign currency hedge | — | — | (105.8 | ) | — | ||||||||||
Purchases of property and equipment | (28.9 | ) | (9.1 | ) | (61.4 | ) | (26.9 | ) | |||||||
Net cash used in investing activities | (28.9 | ) | (109.4 | ) | (2,373.9 | ) | (694.6 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Proceeds from debt | 7.5 | — | 2,641.2 | 855.5 | |||||||||||
Repayment of debt | (11.2 | ) | (1.7 | ) | (705.5 | ) | (451.0 | ) | |||||||
Payment of holdbacks | (1.8 | ) | (2.4 | ) | (11.2 | ) | (22.7 | ) | |||||||
Debt issuance costs paid to third parties and lenders | (4.3 | ) | (2.2 | ) | (62.8 | ) | (29.9 | ) | |||||||
Proceeds from equity issuance, net of issuance costs | — | — | 424.5 | — | |||||||||||
Repayment of capital leases | (0.4 | ) | (0.4 | ) | (2.1 | ) | (1.0 | ) | |||||||
Proceeds from issuance of common stock under ESPP | 0.3 | 0.2 | 0.7 | 0.5 | |||||||||||
Tax withholding related to the vesting of restricted stock | (5.9 | ) | (0.9 | ) | (16.1 | ) | (3.2 | ) | |||||||
Exercise of stock options | 0.4 | 0.4 | 1.6 | 1.0 | |||||||||||
Net cash (used in) provided by financing activities | (15.4 | ) | (7.0 | ) | 2,270.3 | 349.2 | |||||||||
Effect of exchange rate changes on cash | (3.9 | ) | (0.4 | ) | 0.1 | (0.9 | ) | ||||||||
Net decrease in cash, cash equivalents, and restricted cash | (26.0 | ) | (95.9 | ) | (53.5 | ) | (299.2 | ) | |||||||
Cash, cash equivalents, and restricted cash at beginning of period | 73.7 | 130.7 | 101.2 | 334.0 | |||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 47.7 | $ | 34.8 | $ | 47.7 | $ | 34.8 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Adjusted EBITDA | |||||||||||||||
Net loss | $ | (23.4 | ) | $ | (9.5 | ) | $ | (190.4 | ) | $ | (22.0 | ) | |||
Benefit from income taxes | (1.6 | ) | (8.7 | ) | (1.1 | ) | (22.7 | ) | |||||||
Interest and other expense, net | 39.5 | 18.1 | 205.6 | 50.5 | |||||||||||
Loss on debt extinguishment | — | 3.0 | 13.8 | 8.6 | |||||||||||
Depreciation and amortization | 58.5 | 32.8 | 146.5 | 94.7 | |||||||||||
Severance, restructuring and other exit costs | 15.5 | 11.1 | 22.7 | 21.8 | |||||||||||
Transaction and integration costs | 10.7 | 3.3 | 25.1 | 13.8 | |||||||||||
Share-based compensation | 9.2 | 6.1 | 23.9 | 16.0 | |||||||||||
Adjusted EBITDA | $ | 108.4 | $ | 56.2 | $ | 246.1 | $ | 160.7 |
Three Months Ended | Nine Months Ended | ||||||||||||||
March 31, 2017 | June 30, 2017 | September 30, 2017 | September 30, 2017 | ||||||||||||
Net cash provided by operating activities | $ | 2.3 | $ | 23.9 | $ | 20.9 | $ | 47.1 | |||||||
Purchases of property and equipment | (8.5 | ) | (9.3 | ) | (9.1 | ) | (26.9 | ) | |||||||
Severance, restructuring and other exit costs | 6.9 | (0.3 | ) | 2.8 | 9.4 | ||||||||||
Transaction and integration costs | 7.4 | 1.9 | 3.7 | 13.0 | |||||||||||
Adjusted Free Cash Flow | 8.1 | 16.2 | 18.3 | 42.6 | |||||||||||
Cash paid for interest | 8.0 | 22.8 | 8.2 | 39.0 | |||||||||||
Adjusted Unlevered Free Cash Flow | $ | 16.1 | $ | 39.0 | $ | 26.5 | $ | 81.6 |
Three Months Ended | Nine Months Ended | ||||||||||||||
March 31, 2018 | June 30, 2018 | September 30, 2018 | September 30, 2018 | ||||||||||||
Net cash provided by operating activities | $ | 12.2 | $ | 15.6 | $ | 22.2 | $ | 50.0 | |||||||
Purchases of property and equipment | (13.2 | ) | (19.3 | ) | (28.9 | ) | (61.4 | ) | |||||||
Severance, restructuring and other exit costs | 4.7 | 6.9 | 10.7 | 22.3 | |||||||||||
Transaction and integration costs | 3.9 | 9.9 | 10.9 | 24.7 | |||||||||||
Adjusted Free Cash Flow | 7.6 | 13.1 | 14.9 | 35.6 | |||||||||||
Cash paid for interest | 31.3 | 30.0 | 41.1 | 102.4 | |||||||||||
Adjusted Unlevered Free Cash Flow | $ | 38.9 | $ | 43.1 | $ | 56.0 | $ | 138.0 |
($ in millions) | Three Months Ended September 30, | ||||||
2018 | 2017 | ||||||
Revenue | |||||||
GTT as reported | $ | 448.6 | $ | 202.6 | |||
Interoute, net of pro forma adjustments (1) | — | 199.4 | |||||
Global Capacity, net of pro forma adjustments (1) | — | 42.7 | |||||
Pro Forma Revenue | $ | 448.6 | $ | 444.7 | |||
Pro Forma % Growth | 0.9 | % | |||||
Pro Forma % Growth (Constant Currency) | 1.4 | % | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 108.4 | $ | 56.2 | |||
Interoute, net of pro forma adjustments (2) | — | 48.8 | |||||
Global Capacity, net of pro forma adjustments (2) | — | 1.5 | |||||
Pro Forma Adjusted EBITDA | $ | 108.4 | $ | 106.5 | |||
Pro Forma Adjusted EBITDA Margin % | 24.2 | % | 23.9 | % | |||
Pro Forma % Growth | 1.8 | % | |||||
Pro Forma % Growth (Constant Currency) | 2.3 | % |
(1) Pro forma adjustments include (i) revenue recognized by acquired companies from GTT, net of revenue recognized by GTT from acquired companies prior to their respective close dates; (ii) adjustments in deferred revenue from acquired companies and (iii) adjustments related to converting operating results from International Financial Reporting Standard ("IFRS") to U.S. GAAP. | ||||
(2) Pro forma adjustments include (i) net adjustments in deferred revenue and deferred costs from acquired company and (ii) adjustments related to converting operating results from IFRS to U.S. GAAP. |
($ in millions) | Three Months Ended | ||||||
September 30, 2018 | June 30, 2018 | ||||||
Revenue | |||||||
GTT as reported | $ | 448.6 | $ | 326.8 | |||
Interoute, net of pro forma adjustments(1) | — | 134.5 | |||||
Pro Forma Revenue | $ | 448.6 | $ | 461.3 | |||
Pro Forma % Growth | (2.8 | )% | |||||
Pro Forma % Growth (Constant Currency) | (1.2 | )% | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 108.4 | $ | 74.9 | |||
Interoute, net of pro forma adjustments (2) | — | 33.4 | |||||
Pro Forma Adjusted EBITDA | $ | 108.4 | $ | 108.3 | |||
Pro Forma Adjusted EBITDA Margin % | 24.2 | % | 23.5 | % | |||
Pro Forma % Growth | 0.1 | % | |||||
Pro Forma % Growth (Constant Currency) | 2.0 | % |
(1) Pro forma adjustments include (i) revenue recognized by acquired companies from GTT, net of revenue recognized by GTT from acquired companies prior to their respective close dates; (ii) adjustments in deferred revenue from acquired companies and (iii) adjustments related to converting operating results from International Financial Reporting Standard ("IFRS") to U.S. GAAP. | ||||
(2) Pro forma adjustments include (i) net adjustments in deferred revenue and deferred costs from acquired company and (ii) adjustments related to converting operating results from IFRS to U.S. GAAP. |
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