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 8, 2019 |
Date: | May 8, 2019 | |||
GTT Communications, Inc. | ||||
By: | /s/ Michael T. Sicoli | |||
Michael T. Sicoli | ||||
Chief Financial Officer |
Exhibit Number | Description | |
Press Release dated May 8, 2019 |
• | Revenue of $450.2 million grew 72.7% compared to 1Q18, and declined 1.0% compared to 4Q18. |
• | Net loss was $27.3 million, compared to net loss of $30.7 million in 1Q18, and net loss of $53.0 million in 4Q18. The net losses in all periods are primarily the result of non-recurring costs, including exit, transaction and integration costs of $12.0 million, $7.8 million and $29.9 million in 1Q19, 1Q18 and 4Q18, respectively, and change in fair value of exchange rate and interest rate hedges of $15.3 million, $17.2 million, and $21.7 million in 1Q19, 1Q18 and 4Q18, respectively. |
• | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) of $122.2 million grew 95.0% compared to 1Q18, and grew 4.3% compared to 4Q18. Adjusted EBITDA margin was 27.2% compared to 24.1% in 1Q18 and 25.8% in 4Q18. |
• | Capital expenditures were $32.1 million (7.1% of revenue) compared to $13.2 million in 1Q18 (5.1% of revenue) and $16.3 million in 4Q18 (3.6% of revenue). |
• | Using constant currency (i) 1Q19 revenue and Adjusted EBITDA would have been higher than reported by $18.1 million and $7.0 million, respectively, compared to 1Q18, and (ii) 1Q19 revenue and Adjusted EBITDA would have been higher than reported by $0.1 million and $0.3 million, compared to 4Q18. |
• | 1Q19 revenue and Adjusted EBITDA declined 0.7% and grew 13.7%, respectively, compared to 1Q18. |
• | 1Q19 revenue and Adjusted EBITDA declined 1.0% and grew 4.5%, respectively, compared to 4Q18. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenue: | |||||||
Telecommunications services | $ | 450.2 | $ | 260.7 | |||
Operating expenses: | |||||||
Cost of telecommunications services | 241.8 | 141.5 | |||||
Selling, general and administrative expenses | 104.1 | 68.3 | |||||
Severance, restructuring and other exit costs | 2.8 | 1.9 | |||||
Depreciation and amortization | 62.8 | 39.8 | |||||
Total operating expenses | 411.5 | 251.5 | |||||
Operating income | 38.7 | 9.2 | |||||
Other expense: | |||||||
Interest expense, net | (48.2 | ) | (20.9 | ) | |||
Other expense, net | (16.0 | ) | (17.4 | ) | |||
Total other expense | (64.2 | ) | (38.3 | ) | |||
Loss before income taxes | (25.5 | ) | (29.1 | ) | |||
Provision for income taxes | 1.8 | 1.6 | |||||
Net Loss | $ | (27.3 | ) | $ | (30.7 | ) | |
Loss per share: | |||||||
Basic | $ | (0.49 | ) | $ | (0.69 | ) | |
Diluted | $ | (0.49 | ) | $ | (0.69 | ) | |
Weighted average shares: | |||||||
Basic | 55,839,212 | 44,632,365 | |||||
Diluted | 55,839,212 | 44,632,365 |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 50.7 | $ | 55.3 | |||
Accounts receivable, net of allowances | 226.4 | 174.5 | |||||
Prepaid and other current assets | 48.7 | 49.2 | |||||
Total current assets | 325.8 | 279.0 | |||||
Property and equipment, net | 1,828.0 | 1,870.4 | |||||
Operating lease right of use assets | 419.9 | — | |||||
Intangible assets, net | 526.5 | 552.4 | |||||
Goodwill | 1,727.0 | 1,738.0 | |||||
Other long-term assets | 83.9 | 97.8 | |||||
Total assets | $ | 4,911.1 | $ | 4,537.6 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable, accrued expenses and other current liabilities | $ | 340.5 | $ | 316.0 | |||
Operating lease liabilities | 81.0 | — | |||||
Finance lease liabilities | 1.7 | 6.7 | |||||
Long-term debt | 36.8 | 39.9 | |||||
Deferred revenue | 87.4 | 84.2 | |||||
Total current liabilities | 547.4 | 446.8 | |||||
Operating lease liabilities, long-term portion | 331.2 | — | |||||
Finance lease liabilities, long-term portion | 36.0 | 35.1 | |||||
Long-term debt, long-term portion | 3,152.2 | 3,151.6 | |||||
Deferred revenue, long-term portion | 280.8 | 287.0 | |||||
Deferred tax liabilities | 172.7 | 176.2 | |||||
Other long-term liabilities | 30.7 | 26.2 | |||||
Total liabilities | 4,551.0 | 4,122.9 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Total stockholders’ equity | 360.1 | 414.7 | |||||
Total liabilities and stockholders’ equity | $ | 4,911.1 | $ | 4,537.6 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (27.3 | ) | $ | (30.7 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 62.8 | 39.8 | |||||
Share-based compensation | 8.7 | 5.9 | |||||
Debt discount amortization | 1.9 | (0.2 | ) | ||||
Amortization of debt issuance costs | 1.2 | 1.2 | |||||
Change in fair value of derivative financial liability | 15.3 | 17.2 | |||||
Excess tax benefit and deferred income taxes | 1.3 | 0.4 | |||||
Change in fair value of acquisition earn-out | — | 0.1 | |||||
Deferred revenue | 2.6 | (5.1 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions | (50.4 | ) | (16.4 | ) | |||
Net cash provided by operating activities | 16.1 | 12.2 | |||||
Cash flows from investing activities: | |||||||
Acquisition of businesses, net of cash acquired | (0.5 | ) | (33.6 | ) | |||
Purchases of property and equipment | (32.1 | ) | (13.2 | ) | |||
Net cash used in investing activities | (32.6 | ) | (46.8 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from debt | 26.0 | — | |||||
Repayment of debt | (11.6 | ) | (1.8 | ) | |||
Payment of holdbacks | (3.3 | ) | (5.7 | ) | |||
Repayment of finance leases | (0.6 | ) | (0.7 | ) | |||
Proceeds from issuance of common stock under ESPP | 0.1 | 0.1 | |||||
Tax withholding related to the vesting of restricted stock | (0.3 | ) | (5.2 | ) | |||
Exercise of stock options | 0.4 | 0.6 | |||||
Net cash provided by financing activities | 10.7 | (12.7 | ) | ||||
Effect of exchange rate changes on cash | 1.2 | 0.5 | |||||
Net decrease in cash, cash equivalents, and restricted cash | (4.6 | ) | (46.8 | ) | |||
Cash, cash equivalents, and restricted cash at beginning of period | 55.3 | 101.2 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 50.7 | $ | 54.4 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Adjusted EBITDA | |||||||
Net loss | $ | (27.3 | ) | $ | (30.7 | ) | |
Provision for income taxes | 1.8 | 1.6 | |||||
Interest and other expense, net | 64.2 | 38.3 | |||||
Depreciation and amortization | 62.8 | 39.8 | |||||
Severance, restructuring and other exit costs | 2.8 | 1.9 | |||||
Transaction and integration costs | 9.2 | 5.9 | |||||
Share-based compensation | 8.7 | 5.9 | |||||
Adjusted EBITDA | $ | 122.2 | $ | 62.7 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net cash provided by operating activities | $ | 16.1 | $ | 12.2 | |||
Purchases of property and equipment | (32.1 | ) | (13.2 | ) | |||
Severance, restructuring and other exit costs | 8.4 | 4.7 | |||||
Transaction and integration costs | 9.7 | 3.9 | |||||
Adjusted Free Cash Flow | 2.1 | 7.6 | |||||
Cash paid for interest | 32.0 | 31.3 | |||||
Adjusted Unlevered Free Cash Flow | $ | 34.1 | $ | 38.9 |
($ in millions) | Three Months Ended March 31, | ||||||
2019 | 2018 | ||||||
Revenue | |||||||
GTT as reported | $ | 450.2 | $ | 260.7 | |||
Interoute, net of pro forma adjustments (1) | — | 210.7 | |||||
Pro Forma Revenue | $ | 450.2 | $ | 471.4 | |||
Pro Forma % Growth | (4.5 | )% | |||||
Pro Forma % Growth (Constant Currency) | (0.7 | )% | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 122.2 | $ | 62.7 | |||
Interoute, net of pro forma adjustments (2) | — | 50.9 | |||||
Pro Forma Adjusted EBITDA | $ | 122.2 | $ | 113.6 | |||
Pro Forma Adjusted EBITDA Margin % | 27.2 | % | 24.1 | % | |||
Pro Forma % Growth | 7.6 | % | |||||
Pro Forma % Growth (Constant Currency) | 13.7 | % |
(1) Pro forma adjustments include (i) revenue recognized by Interoute from GTT, net of revenue recognized by GTT from Interoute prior to the close date; (ii) adjustments in deferred revenue from Interoute 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 Interoute and (ii) adjustments related to converting operating results from IFRS to U.S. GAAP. |
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