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GTT Reports Third Quarter 2015 Financial Results

MCLEAN, Va.--(BUSINESS WIRE)--GTT Communications, Inc. (NYSE: GTT), the leading global cloud networking provider to multinational clients, announced today its financial results for the third quarter ended September 30, 2015. Highlights include:

Q3 earnings report from @GTTCOMM. Revenue nearly doubles due to high growth. New financial objectives announced.

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  • Revenue increased by 97.3% to $97.0 million compared to $49.2 million in third quarter 2014, and by 2.0% compared to $95.1 million in second quarter 2015.
  • Gross profit margin expanded by approximately 580 basis points to 45.0% compared to 39.2% in third quarter 2014, and declined by approximately 90 basis points compared to 45.9% in second quarter 2015.
  • Adjusted Earnings before Interest Taxes Depreciation and Amortization (“EBITDA”)* increased by 133.2% to $20.8 million compared to $8.9 million in third quarter 2014, and by 6.8% compared to $19.5 million in second quarter 2015. Adjusted EBITDA margin expanded by approximately 330 basis points to 21.5% compared to 18.2% in third quarter 2014, and by approximately 100 basis points compared to 20.5% in second quarter 2015.
  • Capital expenditures were $3.5 million in third quarter 2015 compared to $0.4 million in third quarter 2014, and $2.9 million in second quarter 2015. Capital expenditures were approximately 3.6% of revenue during the third quarter. Unlevered Free Cash Flow, defined as Adjusted EBITDA less capital expenditures, was $17.3 million compared to $8.5 million in third quarter 2014, and $16.6 million in second quarter 2015.
  • Using constant currency from third quarter 2014, third quarter 2015 revenue would have been $2.9 million higher and Adjusted EBITDA would have been $0.6 million higher than reported. Foreign currency translation had a minimal impact on third quarter 2015 results of operations compared to second quarter 2015.
  • The year-over-year increases in revenue, gross margin, adjusted EBITDA and unlevered free cash flow are due primarily to the acquisitions of UNSi on October 1, 2014 and MegaPath’s managed services business on April 1, 2015.
  • On October 22, 2015, subsequent to quarter-end, GTT completed the acquisition of One Source Networks (OSN), a provider of global data, Internet, Session Initiation Protocol (SIP) trunking and managed services to Fortune 1000 companies. GTT paid $175 million for OSN, including approximately $164 million in cash and $11 million in GTT stock, plus approximately $5 million in cash for an estimated working capital surplus as of the closing date. GTT funded the cash portion of the consideration and refinanced its existing debt with a new credit facility, consisting of a seven-year $400 million Term Loan B and a five-year $50 million revolving line of credit.

*See “Annex A: Non-GAAP Financial Information” for more information regarding the computation of Adjusted EBITDA, Gross Profit Margin, Unlevered Free Cash Flow and Constant Currency calculations.

“GTT is on track to deliver a strong 2015 performance,” said Rick Calder, GTT president and CEO. “Over the past year we have completed three highly strategic acquisitions that have significantly increased GTT’s presence and scale in the marketplace and will drive our continued growth. Having achieved our previously announced financial objectives of $400 million in revenue and $100 million in Adjusted EBITDA, I am pleased to announce that we have established our next set of financial objectives to reach $1 billion in revenue and $250 million in Adjusted EBITDA within the next five years.”

“GTT delivered solid revenue growth and Adjusted EBITDA margin expansion during the third quarter,” said Mike Sicoli, GTT chief financial officer. “Our integration of MegaPath’s managed services business is now substantially complete and we are on track to realize full synergy benefits in the fourth quarter. Subsequent to the end of the quarter, we completed the acquisition of One Source Networks, a highly strategic and accretive transaction, and we welcome OSN’s talented employees to GTT.”

Conference Call Information

GTT will hold a conference call on Thursday, November 5, 2015 at 10:00 a.m. EST to discuss its results for the quarter ended September 30, 2015. To participate in the live conference call, interested parties may call dial +1.888.572.7025 or +1.719.325.2432, using the passcode 449689 and asking for the GTT call, or listen via webcast on GTT’s website.

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 449689. The webcast will be archived in the investor relations section of GTT's web site.

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...


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