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 | |
99.1 | Press Release dated November 9, 2016 |
Date: | November 9, 2016 | |||
GTT Communications, Inc. | ||||
By: | /s/ Michael T. Sicoli | |||
Michael T. Sicoli | ||||
Chief Financial Officer |
Exhibit Number | Description | |
99.1 | Press Release dated November 9, 2016 |
• | Revenue increased by 35.9% to $131.9 million compared to $97.0 million in third quarter 2015, and by 2.3% compared to $128.9 million in second quarter 2016. |
• | Net income increased to $5.1 million compared to net income of $1.8 million in third quarter 2015 and $0.1 million in second quarter 2016. Basic and diluted earnings per share increased to $0.14 per share compared to basic and diluted earnings of $0.05 per share in third quarter 2015 and $0.00 per share in second quarter 2016. |
• | Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) increased by 54.1% to $32.1 million compared to $20.8 million in third quarter 2015, and by 6.2% compared to $30.3 million in second quarter 2016. Adjusted EBITDA margin expanded to 24.4% compared to 21.5% in third quarter 2015 and 23.5% in second quarter 2016. |
• | Capital expenditures were $5.5 million compared to $3.5 million in third quarter 2015 and $4.8 million in second quarter 2016. Adjusted EBITDA less capital expenditures was $26.6 million compared to $17.3 million in third quarter 2015 and $25.5 million in second quarter 2016. |
• | Using constant currency (i) when compared to third quarter 2015, third quarter 2016 revenue and Adjusted EBITDA would have been higher than reported by $1.3 million and $0.5 million, respectively, and (ii) when compared to second quarter 2016, third quarter 2016 revenue and Adjusted EBITDA would have been higher than reported by $0.8 million and $0.3 million, respectively. |
• | On a pro forma basis, assuming (i) OSN’s historical results had been included for all periods presented, and (ii) constant currency, third quarter 2016 revenue and Adjusted EBITDA grew by 13.5% and 29.7%, respectively, compared to third quarter 2015 and by 2.9% and 7.3%, respectively, compared to the second quarter 2016. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Telecommunications services | $ | 131,851 | $ | 96,996 | $ | 385,201 | $ | 254,425 | |||||||
Operating expenses: | |||||||||||||||
Cost of telecommunications services | 68,184 | 53,363 | 202,653 | 142,521 | |||||||||||
Selling, general and administrative expenses | 37,177 | 25,553 | 105,311 | 69,410 | |||||||||||
Severance, restructuring and other exit costs | (625 | ) | — | 870 | 7,747 | ||||||||||
Depreciation and amortization | 14,880 | 12,631 | 46,139 | 32,472 | |||||||||||
Total operating expenses | 119,616 | 91,547 | 354,973 | 252,150 | |||||||||||
Operating income | 12,235 | 5,449 | 30,228 | 2,275 | |||||||||||
Other expense: | |||||||||||||||
Interest expense, net | (7,123 | ) | (3,080 | ) | (21,620 | ) | (7,829 | ) | |||||||
Loss on debt extinguishment | — | — | (1,632 | ) | (1,056 | ) | |||||||||
Other expense, net | (74 | ) | (706 | ) | (542 | ) | (1,798 | ) | |||||||
Total other expense | (7,197 | ) | (3,786 | ) | (23,794 | ) | (10,683 | ) | |||||||
Income (loss) before income taxes | 5,038 | 1,663 | 6,434 | (8,408 | ) | ||||||||||
(Benefit from) provision for income taxes | (89 | ) | (99 | ) | 320 | (124 | ) | ||||||||
Net income (loss) | $ | 5,127 | $ | 1,762 | $ | 6,114 | $ | (8,284 | ) | ||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.14 | $ | 0.05 | $ | 0.17 | $ | (0.24 | ) | ||||||
Diluted | $ | 0.14 | $ | 0.05 | $ | 0.16 | $ | (0.24 | ) | ||||||
Weighted average shares: | |||||||||||||||
Basic | 37,152,063 | 34,981,104 | 36,998,607 | 34,603,144 | |||||||||||
Diluted | 37,785,921 | 35,888,525 | 37,481,414 | 34,603,144 |
September 30, 2016 | December 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 15,407 | $ | 14,630 | |||
Accounts receivable, net of allowances of $4,242 and $1,015, respectively | 81,685 | 60,446 | |||||
Deferred costs | 4,030 | 4,159 | |||||
Prepaid expenses and other current assets | 15,313 | 13,663 | |||||
Total current assets | 116,435 | 92,898 | |||||
Property and equipment, net | 40,492 | 38,823 | |||||
Intangible assets, net | 177,067 | 182,184 | |||||
Other assets | 13,255 | 11,593 | |||||
Goodwill | 280,593 | 270,956 | |||||
Total assets | $ | 627,842 | $ | 596,454 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 12,664 | $ | 22,725 | |||
Accrued expenses and other current liabilities | 40,476 | 43,115 | |||||
Acquisition earn-outs and holdbacks | 7,129 | 12,842 | |||||
Current portion of capital lease obligations | 1,015 | 1,392 | |||||
Current portion of long-term debt | 4,300 | 4,000 | |||||
Deferred revenue | 16,647 | 15,469 | |||||
Total current liabilities | 82,231 | 99,543 | |||||
Capital lease obligations, net of current portion | 512 | 961 | |||||
Long-term debt, net of current portion | 412,159 | 382,243 | |||||
Deferred revenue, less current portion | 3,137 | 2,292 | |||||
Other long-term liabilities | 4,367 | 929 | |||||
Total liabilities | 502,406 | 485,968 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Common stock, par value $.0001 per share, 80,000,000 shares authorized, 37,226,966 and 36,533,634 shares issued and outstanding as of September 30, 2016 and December 31, 2015, respectively | 3 | 3 | |||||
Additional paid-in capital | 193,759 | 182,797 | |||||
Accumulated deficit | (63,787 | ) | (69,901 | ) | |||
Accumulated other comprehensive loss | (4,539 | ) | (2,413 | ) | |||
Total stockholders’ equity | 125,436 | 110,486 | |||||
Total liabilities and stockholders’ equity | $ | 627,842 | $ | 596,454 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | 6,114 | $ | (8,284 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 46,139 | 32,472 | |||||
Share-based compensation | 10,896 | 5,417 | |||||
Debt discount amortization | 600 | — | |||||
Loss on debt extinguishment | 1,632 | 1,056 | |||||
Amortization of debt issuance costs | 1,188 | 697 | |||||
Change in fair value of acquisition earn-out | — | 880 | |||||
Changes in operating assets and liabilities, net of acquisitions: | (33,802 | ) | (12,355 | ) | |||
Net cash provided by operating activities | 32,767 | 19,883 | |||||
Cash flows from investing activities: | |||||||
Acquisition of businesses, net of cash acquired | (14,146 | ) | (131,397 | ) | |||
Purchase of customer contracts | (6,000 | ) | — | ||||
Purchases of property and equipment | (17,813 | ) | (9,842 | ) | |||
Net cash used in investing activities | (37,959 | ) | (141,239 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from revolving line of credit | 33,000 | — | |||||
Repayment of revolving line of credit | (32,000 | ) | — | ||||
Proceeds from term loan | 29,850 | 230,000 | |||||
Repayment of term loan | (3,150 | ) | (129,376 | ) | |||
Payment of earn-out and holdbacks | (15,563 | ) | (3,239 | ) | |||
Debt issuance costs | (904 | ) | (4,801 | ) | |||
Repayment of capital leases | (1,433 | ) | (610 | ) | |||
Proceeds from issuance of common stock under employee stock purchase plan | 1,045 | — | |||||
Tax withholding related to the vesting of restricted stock units | (3,442 | ) | (2,017 | ) | |||
Exercise of stock options | 468 | 633 | |||||
Net cash provided by financing activities | 7,871 | 90,590 | |||||
Effect of exchange rate changes on cash | (1,902 | ) | 1,223 | ||||
Net increase (decrease) in cash and cash equivalents | 777 | (29,543 | ) | ||||
Cash and cash equivalents at beginning of period | $ | 14,630 | $ | 49,256 | |||
Cash and cash equivalents at end of period | $ | 15,407 | $ | 19,713 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Amounts in thousands, except share and per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Adjusted EBITDA | |||||||||||||||
Net income (loss) | $ | 5,127 | $ | 1,762 | $ | 6,114 | $ | (8,284 | ) | ||||||
Provision for (benefit from) income taxes | (89 | ) | (99 | ) | 320 | (124 | ) | ||||||||
Interest and other expense, net | 7,197 | 3,786 | 22,162 | 9,627 | |||||||||||
Loss on debt extinguishment | — | — | 1,632 | 1,056 | |||||||||||
Depreciation and amortization | 14,880 | 12,631 | 46,139 | 32,472 | |||||||||||
Severance, restructuring and other exit costs | (625 | ) | — | 870 | 7,747 | ||||||||||
Transaction and integration costs | 801 | 1,044 | 3,124 | 3,595 | |||||||||||
Share-based compensation | 4,844 | 1,723 | 10,896 | 5,417 | |||||||||||
Adjusted EBITDA | 32,135 | 20,847 | 91,257 | 51,506 | |||||||||||
Purchases of property and equipment | (5,525 | ) | (3,532 | ) | (17,813 | ) | (9,842 | ) | |||||||
Adjusted EBITDA less capital expenditures | $ | 26,610 | $ | 17,315 | $ | 73,444 | $ | 41,664 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenue: | |||||||||||||||
Telecommunications services | $ | 131,851 | $ | 96,996 | $ | 385,201 | $ | 254,425 | |||||||
Operating Expenses: | |||||||||||||||
Cost of telecommunications services provided | 68,184 | 53,363 | 202,653 | 142,521 | |||||||||||
Gross profit | $ | 63,667 | $ | 43,633 | $ | 182,548 | $ | 111,904 |
($ in thousands) | Three Months Ended | ||||||
September 30, 2016 | September 30, 2015 | ||||||
Revenue | |||||||
GTT as reported | $ | 131,851 | $ | 96,996 | |||
GTT pro forma adjustments (1) | — | (125 | ) | ||||
OSN as reported | — | 20,885 | |||||
OSN pro forma adjustments (2) | — | (564 | ) | ||||
Pro Forma Revenue | $ | 131,851 | $ | 117,192 | |||
Pro Forma % Growth | 12.5 | % | |||||
Pro Forma % Growth (Constant Currency) | 13.5 | % | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 32,135 | $ | 20,847 | |||
GTT pro forma adjustments (3) | — | (1 | ) | ||||
OSN as reported | — | 4,360 | |||||
OSN pro forma adjustments (4) | — | (41 | ) | ||||
Pro Forma Adjusted EBITDA | $ | 32,135 | $ | 25,165 | |||
Pro Forma Adjusted EBITDA Margin % | 24.4 | % | 21.5 | % | |||
Pro Forma % Growth | 27.7 | % | |||||
Pro Forma % Growth (Constant Currency) | 29.7 | % |
(1) Represents revenue recognized by GTT from acquired company prior to its respective close date | ||||
(2) Represents (i) revenue recognized by acquired company from GTT prior to its respective close date and (ii) non-recurring installation revenue historically recognized on a cash basis by acquired company | ||||
(3) Represents revenue, net of expense, recognized by GTT from acquired company prior to its respective close date | ||||
(4) Represents (i) revenue, net of expense, recognized by acquired company from GTT prior to its respective close date, (ii) non-recurring installation revenue, net of non-recurring installation expenses, historically recognized on a cash basis by acquired company, (iii) non-cash stock compensation, and (iv) non-recurring expenses outside of the normal course of business. |
($ in thousands) | Three Months Ended | ||||||
September 30, 2016 | June 30, 2016 | ||||||
Revenue | |||||||
GTT as reported | $ | 131,851 | $ | 128,914 | |||
Pro Forma Revenue | $ | 131,851 | $ | 128,914 | |||
Pro Forma % Growth | 2.3 | % | |||||
Pro Forma % Growth (Constant Currency) | 2.9 | % | |||||
Adjusted EBITDA | |||||||
GTT as reported | $ | 32,135 | $ | 30,263 | |||
Pro Forma Adjusted EBITDA | $ | 32,135 | $ | 30,263 | |||
Pro Forma Adjusted EBITDA Margin % | 24.4 | % | 23.5 | % | |||
Pro Forma % Growth | 6.2 | % | |||||
Pro Forma % Growth (Constant Currency) | 7.3 | % |