Revenue Grew 9% to $49.2 Million
Adjusted EBITDA Increased 18% to $8.9
million
GTT Communications, Inc. (“GTT”) (NYSE MKT: GTT), the leading
global cloud networking provider to multinational enterprises,
today announced its financial results for the third quarter ended
September 30, 2014. Highlights include:
- Revenue increased 9.0 percent to $49.2
million compared to $45.1 million in the third quarter of 2013
- Gross Margin increased 470 basis points
to 39.2% compared to 34.5% in the third quarter of 2013
- Adjusted Earnings before Interest Taxes
Depreciation and Amortization (“EBITDA”)* increased by 18.2 percent
to $8.9 million compared to $7.6 million in the third quarter of
2013
- On August 6, 2014, completed a senior
debt financing simplifying the capital structure, eliminating all
outstanding warrants, increasing financial flexibility, and
significantly reducing the overall cost of debt
- On October 1, 2014, closed the
acquisition of UNSi, a communications company providing data
services to large enterprise and carrier clients
* See “Annex A: Non-GAAP Financial Information-Adjusted EBITDA”
for more information regarding the computation of Adjusted
EBITDA.
“We had another tremendous quarter with strong sequential and
year-over-year growth,” stated Rick Calder, President and CEO. “We
continue to win new large multi-location clients, grow our existing
client base, and deliver substantial revenue and Adjusted EBITDA
increases and incremental margin expansion.”
Subsequent to the quarter-end, GTT closed on the acquisition of
UNSi to further execute on GTT’s growth strategy to extend
ubiquitous network connectivity, to expand its cloud networking
service portfolio, and to deliver outstanding service to its
clients with simplicity, speed and agility.
“We are moving ahead quickly with our proven integration
template. We expect to derive substantial post-close synergies from
SG&A and cost of revenue over the next two quarters. With nine
months of strong results in hand and a strategic acquisition
kicking off the fourth quarter, we have guaranteed a terrific 2014
and are well on our way to our next financial objective of $400
million in revenue and $100 million in Adjusted EBITDA.”
Capital expenditures in the third quarter of $0.4 million, or
0.8% of revenue, supported the growing traffic demand across GTT’s
global network. Capital expenditures year-to-date of $3.1 million,
or 2.1% of revenue, are consistent with GTT’s capex-light business
model.
“As we execute on our growth strategy, we have increased
operating leverage on our larger revenue base and accelerated
Unlevered Free Cash Flow to $8.5 million in the third quarter and
$22.9 million year to date,” stated Michael Bauer, Chief Financial
Officer. “Additionally, we reported the closing of our new debt
facility as evidenced by our substantially lower interest expense
in the third quarter. We took advantage of the flexibility our
facility offered by drawing down the $15 million Delayed Draw Term
Loan to partially fund the acquisition of UNSi. Our balance sheet
remains very strong and we are well positioned to complete another
year of strong growth.”
Conference Call Information
GTT will hold a conference call today, Tuesday, November 11,
2014 at 10:00 a.m. Eastern Time to discuss these results. To
participate in the live conference call, interested parties may
dial +1.888.510.1785 or +1.719.457.2648, entering passcode 6733333.
A simultaneous live webcast of the call will be available over the
Internet at www.gtt.net, under the Investor Relations section of
the site. A telephonic replay of the conference call will be
available for one month and may be accessed by calling
+1.888.203.1112 or +1.719.457.0820 and using the passcode 6733333.
The webcast will be archived in the investor relations section of
the company's web site www.gtt.net.
Forward-Looking Statements
This release includes certain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995, which reflect the current views of GTT Communications,
Inc., with respect to current events and financial performance.
From time to time, GTT Communications, Inc., which we refer to as
“we”, “us” or “our” and in some cases, “GTT” or the “Company”, also
provides forward-looking statements in other materials GTT releases
to the public or files with the United States Securities &
Exchange Commission (“SEC”), as well as oral forward-looking
statements. You should consult any further disclosures on related
subjects in our quarterly reports on Form 10-Q and current reports
on Form 8-K filed with the SEC. Such forward-looking statements are
and will be subject to many risks, uncertainties and factors
relating to our operations and the business environment that may
cause our actual results to be materially different from any future
results, express or implied, by such forward-looking statements.
Factors that could cause GTT’s actual results to differ materially
from these forward-looking statements include, but are not limited
to, the following: our ability to obtain capital; our ability to
develop and market new products and services that meet customer
demands and generate acceptable margins; our reliance on several
large customers; our ability to negotiate and enter into acceptable
contract terms with our suppliers; our ability to attract and
retain qualified management and other personnel; competition in the
industry in which we do business; failure of the third-party
communications networks on which we depend; legislation or
regulatory environments, requirements or changes adversely
affecting the businesses in which we are engaged; our ability to
maintain our databases, management systems and other intellectual
property; our ability to maintain adequate liquidity and produce
sufficient cash flow to fund our capital expenditures and debt
service; technological developments and changes in the industry;
our ability to complete acquisitions or divestitures and to
integrate any business or operation acquired; our ability to
overcome significant operating losses; and general economic
conditions. Additional information concerning these and other
important factors can be found under the heading "Risk Factors" in
GTT's annual and quarterly reports filed with the Securities and
Exchange Commission including, but not limited to, its Annual
Report on Form 10-K. Statements in this release should be evaluated
in light of these important factors.
About GTT
GTT operates a global Tier 1 IP network with the most
interconnected Ethernet service platform around the world. We
provide highly reliable, scalable and secure cloud networking
services. Our clients trust us to deliver solutions with
simplicity, speed, and agility that are unmatched by other network
providers. For more information visit GTT www.gtt.net.
Consolidated Statements of
Operations
(Amounts in thousands, except for share
and per share data)
Three Months Ended Nine Months Ended
September 30, September 30, September
30, September 30, 2014 2013
2014 2013 Revenue: Telecommunications services
sold $ 49,161 $ 45,106 $ 144,684 $ 111,267
Operating
expenses: Cost of telecommunications services provided 29,891
29,538 89,233 73,421 Selling, general and administrative expense
11,001 8,391 31,349 22,409 Restructuring costs, employee
termination and other items 3,342 — 3,342 7,677 Depreciation and
amortization 5,878 5,157 16,911 11,902
Total
operating expenses 50,112 43,086 140,835
115,409 Operating income (loss) (951 ) 2,020 3,849
(4,142 ) Other expense: Interest expense, net (1,761 )
(2,445 ) (6,755 ) (5,624 ) Loss on debt extinguishment (3,104 ) —
(3,104 ) (706 ) Other expense, net (215 ) (3,449 ) (8,504 ) (6,187
) Total
other expense, net (5,080 ) (5,894 ) (18,363 ) (12,517 )
Loss before income taxes (6,031 ) (3,874 ) (14,514 ) (16,659 )
Provision for income taxes 605 416 811
437
Net loss $ (6,636 ) $ (4,290 ) $ (15,325 ) $ (17,096 ) Loss
per share: Basic $ (0.23 ) $ (0.19 ) $ (0.59 ) $ (0.79 ) Diluted $
(0.23 ) $ (0.19 ) $ (0.59 ) $ (0.79 ) Weighted average
shares: Basic 28,447,718 22,932,515 25,873,393 21,578,315 Diluted
28,447,718 22,932,515 25,873,393 21,578,315
GTT
Communications, Inc. Consolidated Balance Sheets
(Amounts in thousands, except for share
and per share data)
September 30, 2014 December 31, 2013
ASSETS Current assets: Cash and cash
equivalents $ 41,610 $ 5,785 Accounts receivable, net of allowances
of $546 and $702, respectively 23,658 22,305 Deferred contract
costs 3,111 1,975 Prepaid expenses and other current assets 2,391
2,878
Total current assets 70,770 32,943
Property and equipment, net 16,269 20,450 Intangible assets, net
45,085 43,618 Other assets 8,164 7,726 Goodwill 71,082
67,019
Total assets $ 211,370 $ 171,756
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 18,941 $ 20,983 Accrued
expenses and other current liabilities 22,718 26,999 Short-term
debt 5,500 6,500 Deferred revenue 7,486 6,797
Total current liabilities 54,645 61,279 Long-term debt
119,500 85,960 Deferred revenue 989 1,480 Warrant liability —
12,295 Other long-term liabilities 1,902 1,232
Total liabilities 177,036 162,246
Commitments and contingencies Stockholders' equity:
Common stock, par value $.0001 per share, 80,000,000 shares
authorized, 28,881,586, and 23,311,023 shares issued and
outstanding as of September 30, 2014 and December 31, 2013,
respectively 3 2 Additional paid-in capital 116,244 76,014
Accumulated deficit (81,551 ) (66,226 ) Accumulated other
comprehensive loss (362 ) (280 )
Total stockholders' equity
34,334 9,510
Total liabilities and stockholders'
equity $ 211,370 $ 171,756
ANNEX A: Non-GAAP Financial
Information
GTT provides financial measures that are not defined under
generally accepted accounting principles in the United States, or
GAAP, including earnings before interest, taxes, depreciation and
amortization (“EBITDA”), Adjusted EBITDA and unlevered Free Cash
Flow. EBITDA, Adjusted EBITDA and unlevered Free Cash Flow are not
measurements of our financial performance under GAAP and should not
be considered in isolation or as alternatives to net earnings or
any other performance measures derived in accordance with GAAP or
as alternatives to cash flows from operating activities as measures
of liquidity.
“Adjusted EBITDA” is defined as EBITDA from continuing
operations adjusted to exclude costs associated with employee
terminations, stock-based compensation, and certain non-cash or
non-recurring items. Management uses EBITDA and Adjusted EBITDA to
evaluate operating performance, and this financial measure is among
the primary measures used by management for planning and
forecasting future periods. GTT further believes that the
presentation of EBITDA and 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, although GTT’s
computation of Adjusted EBITDA may not be comparable to other
similarly titled measures computed by other companies, because all
companies do not calculate Adjusted EBITDA in the same fashion.
Adjusted EBITDA has limitations as an analytical tool, and
should not be considered in isolation from, or as a substitute for,
analysis of our results as reported under GAAP. For example,
Adjusted EBITDA:
- does not reflect capital expenditures,
or future requirements for capital and major maintenance
expenditures or contractual commitments;
- does not reflect changes in, or cash
requirements for, our working capital needs;
- does not reflect the significant
interest expense, or the cash requirements necessary to service the
interest payments, on our debt; and
- does not reflect cash required to pay
income taxes.
In addition to Adjusted EBITDA, GTT management uses Unlevered
Free Cash Flow, which measures the ability of Adjusted EBITDA to
cover capital expenditures. Adjusted EBITDA is a performance,
rather than a cash flow measure. Correlating our capital
expenditures to our Adjusted EBITDA does not imply that we will be
able to fund such capital expenditures solely with cash from
operations.
The following is a reconciliation of Adjusted EBITDA and
Unlevered Free Cash Flow from Net Loss (amounts in thousands):
Three Months Ended Nine Months Ended
September 30, September 30, September
30, September 30, 2014 2013
2014 2013 Net loss $ (6,636 ) $ (4,290 ) $ (15,325 )
$ (17,096 ) Provision for income taxes 605 416 811 437 Interest and
other, net 1,976 5,894 15,259 11,811 Depreciation and amortization
5,878 5,157 16,911 11,902
EBITDA
1,823 7,177 17,656 7,054
Restructuring costs, employee termination
and other items
3,342 — 3,342 7,677 Loss on debt extinguishment 3,104 —
3,104
706
Non-cash compensation 669 386 1,815 893
Adjusted EBITDA $ 8,938 $ 7,563 $ 25,917
$ 16,330 Purchases of property and equipment
(413 ) (1,329 ) (3,058 ) (2,328 )
Unlevered Free Cash Flow $
8,525 $ 6,234 $ 22,859 $ 14,002
GTT Investor RelationsJody Burfening/Carolyn
Capaccio1-212-838-3777ccapaccio@lhai.comorGTT Media InquiriesAnn
Rote1-703-677-9941ann.rote@gtt.net
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