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Press Release -- August 10th, 2011
Source: gtt
Tags: Earnings, Equipment, Exchange

Global Telecom & Technology Reports Second Quarter and Year-to-Date 2011 Results

Company Completes PacketExchange Acquisition

MCLEAN, Va., Aug 10, 2011 (BUSINESS WIRE) — Global Telecom & Technology, Inc. (“GTT”), a global telecommunications carrier and leading network integrator serving the data communications needs of large enterprise, government and carrier clients, announced today financial results for the three months and six months ended June 30, 2011. Financial highlights and historical comparisons include (in millions, except per share data):

                                                     2Q11      2Q10       1H11      1H10
                                                  ---------- --------- ---------- ---------
          Revenue                                 $  21.2    $ 19.7    $  41.6    $ 40.3
          Gross Margin                               30.2 %    30.1 %     29.8 %    28.8 %
          Adjusted EBITDA*                        $   1.9    $  1.6    $   3.7    $  3.2
          Net Income**                            $  (0.6)  $  0.3    $  (0.1)  $  0.5
          Earnings per Share (Basic and Diluted)  $ (0.03)  $ 0.02    $ (0.01)  $ 0.03
         * See "Annex A: Non-GAAP Financial Information--Adjusted EBITDA" for
         more information regarding the computation of Adjusted EBITDA.
         ** Net income in the second quarter 2011 includes restructuring
         costs, employee termination and non-recurring items totaling $1.0
         million related to the acquisition of PacketExchange.

Excluding restructuring costs, employee termination and non-recurring items resulting from the acquisition of PacketExchange, earnings per share (basic and diluted) would have been $0.02 for the second quarter 2011 and $0.05 year-to-date.

“GTT has produced another strong quarter of financial results and closed on a strategic acquisition,” said Richard D. Calder Jr., President and Chief Executive Officer. “Revenue grew nearly 8 percent year-over-year and Adjusted EBITDA grew 19 percent. In the third quarter, we look forward to continued top and bottom-line growth as we realize a full quarter of contribution from our recent acquisition and continue our organic growth.

“The PacketExchange acquisition closed in June and we have successfully integrated the network assets, services and clients into our proprietary Client Management Database (CMD) ensuring seamless high-quality support of ongoing client installations, service delivery and network support. We have begun to leverage the strength of the combined network to deliver an expanded service portfolio.”

The acquisition was funded through an expanded term loan facility with GTT’s existing lender, Silicon Valley Bank and a new term loan facility from BIA Digital Partners SBIC II LP, a private investment firm with a focus on mid to later-stage companies.

“GTT raised approximately $13.8 million of debt financing in the second quarter to fund the acquisition,” stated Eric Swank, Chief Financial Officer. “We raised $6.3 million in the form of a modification to our existing loan and security agreement with Silicon Valley Bank that expands the amount of borrowing under our term loan facility. In addition, we secured a $7.5 million term loan with BIA Digital Partners. These commitments demonstrate the strength of our model and the economic potential of this acquisition and we look to unlock that potential in the coming quarters.”

Conference Call Information

GTT will hold a conference call on Thursday, August 11, 2011 at 10:00 a.m. Eastern Time to discuss its results for the three months and six months ended June 30, 2011. To participate in the live conference call, interested parties may dial +1.800.390.5311 or +1.719.325.2298 and enter passcode 7942076. A simultaneous live webcast of the call will be available over the Internet at , under the Investor Relations section of the site. A replay of the call will be available for one month. Interested parties can access the call replay by dialing 1.888.203.1112 or +1.719.457.0820 and using the passcode 7942076. In addition, a replay of the webcast will be available on GTT’s website at .

About GTT

GTT is a global telecommunications carrier and leading network integrator serving the data communications needs of large enterprise, government and carrier clients in over 80 countries. We combine our own network assets with the networks of over 800 suppliers worldwide to deliver cost-effective, scalable solutions supporting each client’s unique requirements. Through our proprietary Client Management Database (CMD), GTT provides streamlined service design and quotation, rapid service implementation, and global 24×7 monitoring and support. GTT is headquartered in the Washington, DC metro region with offices in London, Dusseldorf, and Denver. For more information visit the GTT website at .

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 Global Telecom & Technology, Inc., with respect to current events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “intend,” “anticipate,” “believe,” “estimate,” “plan,” “could,” “should,” and “continue” or similar words. These forward-looking statements may also use different phrases. From time to time, Global Telecom & Technology, 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.

                                                                  Global Telecom & Technology, Inc.
                                                           Condensed Consolidated Statements of Operations
                                                     (Amounts in thousands, except for share and per share data)
                                                                                 Three Months Ended                           Six Months Ended
                                                                     ------------------------------------------- -------------------------------------------
                                                                         June 30, 2011         June 30, 2010         June 30, 2011         June 30, 2010
                                                                     --------------------- --------------------- --------------------- ---------------------
          Telecommunications services sold                              $     21,202          $     19,694          $     41,604          $     40,293
        Operating expenses:
          Cost of telecommunications services provided                        14,808                13,765                29,191                28,695
          Selling, general and administrative expenses                         4,606                 4,442                 9,078                 8,718
          Restructuring costs, employee termination and other items              958                     -                   958                     -
          Depreciation and amortization                                          889                   679                 1,565                 1,417
                                                                          ----------            ----------            ----------            ----------
        Total operating expenses                                              21,261                18,886                40,792                38,830
                                                                          ----------            ----------            ----------            ----------
        Operating income (loss)                                                  (59)                 808                   812                 1,463
        Other income (expense):
          Interest expense, net                                                 (459)                (339)                (776)                (693)
          Other expense, net                                                     (24)                 (98)                 (81)                (220)
                                                                          ---------- ----       ---------- ----       ---------- ----       ---------- ----
        Total other income (expense)                                            (483)                (437)                (857)                (913)
                                                                          ---------- ----       ---------- ----       ---------- ----       ---------- ----
        Income (loss) before income taxes                                       (542)                 371                   (45)                 550
        Provision for income taxes                                                35                    62                    68                    83
                                                                          ----------            ----------            ----------            ----------
        Net income (loss)                                               $       (577)        $        309          $       (113)        $        467
                                                                     ==== ========== ====  ==== ==========       ==== ========== ====  ==== ==========
        Earnings (loss) per share:
          Basic                                                         $      (0.03)        $       0.02          $      (0.01)        $       0.03
          Diluted                                                       $      (0.03)        $       0.02          $      (0.01)        $       0.03
        Weighted average shares:
          Basic                                                           18,687,822            16,955,558            18,464,801            16,692,876
          Diluted                                                         18,687,822            17,192,658            18,464,801            16,938,890
                                             Global Telecom & Technology, Inc.
                                           Condensed Consolidated Balance Sheets
                                (Amounts in thousands, except for share and per share data)
                                                                                 June 30, 2011   December 31, 2010
                                                                               ----------------- -----------------
        Current assets:
                                                                                    $   7,368         $   6,562
          Cash and cash equivalents
          Accounts receivable, net of allowances of $2,971 and $4,123,                  7,809             5,787
          Deferred contract costs                                                         966               536
          Prepaid expenses and other current assets                                     3,158             1,105
                                                                                      -------           -------
            Total current assets                                                       19,301            13,990
        Property and equipment, net                                                     4,003             1,674
        Intangible assets, net                                                         12,281             5,732
        Other assets                                                                    4,382             3,519
        Goodwill                                                                       40,950            29,046
                                                                                      -------           -------
        Total assets                                                                $  80,917         $  53,961
                                                                               ====== =======    ====== =======
        Current liabilities:
          Accounts payable                                                          $  17,398         $   9,279
          Accrued expenses and other current liabilities                                9,653             6,831
          Short-term debt                                                               3,240             2,245
          Deferred revenue                                                              6,534             5,898
                                                                                      -------           -------
            Total current liabilities                                                  36,825            24,253
        Long-term debt                                                                 25,518            12,020
        Deferred revenue and other long-term liabilities                                1,054               605
                                                                                      -------           -------
            Total liabilities                                                          63,397            36,878
                                                                                      -------           -------
        Commitments and contingencies
        Stockholders' equity:
          Common stock, par value $.0001 per share, 80,000,000 shares                       2                 2
          authorized, 18,717,252 and 17,880,254 shares issued and outstanding
          as of June 30, 2011 and December 31, 2010, respectively
          Additional paid-in capital                                                   62,061            61,497
          Accumulated deficit                                                         (44,242)         (44,129)
          Accumulated other comprehensive loss                                           (301)            (287)
                                                                                      ------- -         ------- -
          Total stockholders' equity                                                   17,520            17,083
                                                                                      -------           -------
        Total liabilities and stockholders' equity                                  $  80,917         $  53,961
                                                                               ====== =======    ====== =======

ANNEX A: Non-GAAP Financial Information

Adjusted EBITDA

Adjusted EBITDA represents operating income before depreciation and amortization on a non-GAAP (accounting principles generally accepted in the United States of America) combined basis for the periods presented, and adjusted to exclude certain one-time expenses including costs associated with employee terminations and other non-recurring items and non-cash compensation. GTT presents Adjusted EBITDA as a supplemental measure of GTT’s performance. GTT also presents Adjusted EBITDA because GTT believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry and in measuring the ability of issuers to meet debt service obligations.

In evaluating Adjusted EBITDA, you should be aware that in the future GTT may incur expenses similar to the adjustments in this presentation. GTT’s presentation of Adjusted EBITDA should not be construed as an inference that GTT’s future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA is not a measurement of GTT’s financial performance under GAAP and should not be considered as an alternative to net income, operating income or any other performance measures derived in accordance with GAAP.

The following is a reconciliation of Adjusted EBITDA to operating income (amounts in thousands):

                                                                                 Three Months Ended              Six Months Ended
                                                                           ------------------------------- -----------------------------
                                                                             June 30, 2011   June 30, 2010  June 30, 2011  June 30, 2010
                                                                           ---------------- -------------- -------------- --------------
        Operating income (loss)                                               $   (59)          $    808       $    812       $  1,463
        Depreciation and amortization                                             889                 679          1,565          1,417
        Restructuring costs, employee termination and non-recurring items         958                   -            958              -
        Non-cash compensation                                                     156                 144            317            354
                                                                                -----              ------         ------         ------
        Adjusted EBITDA                                                       $ 1,944            $  1,631       $  3,652       $  3,234
                                                                           ==== =====       ====== ======  ====== ======  ====== ======

SOURCE: Global Telecom & Technology, Inc.

        Global Telecom & Technology, Inc.
        For GTT media inquiries:
        Michelle Reilly, 1-703-442-5582
        For GTT investor relations inquiries:
        Eric Swank, Chief Financial Officer, 1-703-442-5529

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