MCLEAN, Va., November 12, 2019 – GTT Communications, Inc. (NYSE: GTT), a leading global cloud networking provider to multinational clients, announced today its financial results for the quarter ended September 30, 2019.
Third quarter highlights:
- Revenue of $420.0 million declined 6.4% compared to 3Q18, and declined 3.2% compared to 2Q19. The sequential revenue decline of 3.2% was attributable to a 0.9% decline in monthly recurring cash revenue, a 0.8% decline from foreign currency, a 0.7% decline in non-recurring and other revenue, a 0.6% decline in the runoff of non-cash deferred revenue, and a 0.2% increase in revenue credits.
- Net install trends improved sequentially over the course of the quarter and net installs were positive in October.
- Net loss was $26.2 million compared to net loss of $23.4 million in 3Q18 and net loss of $33.3 million in 2Q19. The net losses in all periods include non-recurring costs, including exit, transaction and integration costs of $4.3 million, $26.2 million and $12.1 million in 3Q19, 3Q18 and 2Q19, respectively, and losses due to the change in fair value of exchange rate and interest rate hedges of $6.6 million and $19.9 million in 3Q19 and 2Q19, respectively (the 3Q18 period included a gain due to the change in fair value of exchange rate and interest rate hedges of $8.3 million).
- Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) of $102.4 million declined 5.5% compared to 3Q18 and declined 8.6% compared to 2Q19. Adjusted EBITDA margin was 24.4% compared to 24.2% in 3Q18 and 25.8% in 2Q19. Adjusted EBITDA margins were negatively affected by an elevated level of revenue credits, the continued runoff of non-cash revenues and investments in support of organic growth.
- Free Cash Flow of $19.6 million compared to $(6.7) million in 3Q18 and $(4.1) million in 2Q19. Adjusted Unlevered Free Cash Flow of $83.3 million compared to $56.0 million in 3Q18 and $42.9 million in 2Q19.
- Capital expenditures were $26.0 million (6.2% of revenue) compared to $28.9 million in 3Q18 (6.4% of revenue) and $19.2 million in 2Q19 (4.4% of revenue).
- Significant progress in cash collections reducing past due receivable balances in Europe from over $150 million to $90 million through successful dispute resolutions and reorganized cash collections team. European accounts receivable improved from 31% current to 49% current.
- Using constant currency (i) 3Q19 revenue and Adjusted EBITDA would have been higher than reported by $9.8 million and $2.7 million, respectively, compared to 3Q18, and (ii) 3Q19 revenue and Adjusted EBITDA would have been higher than reported by $3.6 million and $0.6 million, compared to 2Q19.
GTT has expanded the scope of its non-strategic and non-core asset divestiture exploratory process to include the Company’s highly differentiated pan-European fiber assets, subsea transatlantic fiber and data center infrastructure, which the Company acquired as part of the Interoute and Hibernia acquisitions.
See “Annex A: Non-GAAP Financial Information” for more information regarding the computation of Adjusted EBITDA, Free Cash Flow, Adjusted Free Cash Flow, Adjusted Unlevered Free Cash Flow, constant currency and pro forma calculations.
Conference Call Information
GTT will hold a conference call on Tuesday, November 12, 2019, at 8:30 a.m. Eastern Time. To participate in the live conference call, interested parties may dial +1-844-875-6916 or +1-412-317-6714 and ask for the GTT call, or view the webcast at GTT’s website.
A telephonic replay of the conference call will be available for one week and may be accessed by calling +1-877-344-7529 or +1-412-317-0088 and using the passcode 10135783. The webcast will be archived in the investor relations section of GTT’s website.
This release contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the current view of GTT Communications, Inc. (“GTT,” “we” or “us”), with respect to its plans, objectives and strategies or future events or future financial performance. From time to time, GTT also provides forward-looking statements in other materials GTT releases to the public or files with the U.S. Securities and Exchange Commission (“SEC”), as well as oral forward-looking statements. You should consult any further disclosures on related subjects in our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our 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: the effects on our business and customers of general economic and financial market conditions; our ability to achieve the expected benefits of certain transactions; 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 prevent process and system failures or security breaches that significantly disrupt the availability and quality of the services that we provide; our ability to maintain adequate liquidity and produce sufficient cash flow to fund acquisitions and capital expenditures; our ability to meet all the terms and conditions of our debt obligations; our ability to obtain capital to grow our business; our ability to utilize our net operating losses; expectations regarding the trading price of our common stock; our ability to complete acquisitions or divestitures and effectively integrate any business or operation acquired; foreign exchange rate fluctuations; and fluctuations in our effective tax rate. 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 SEC including, but not limited to, its Annual Report on Form 10-K for the year ended December 31, 2018. Statements in this release should be evaluated in light of these important factors.
GTT connects people across organizations, around the world and to every application in the cloud. Our clients benefit from an outstanding service experience built on our core values of simplicity, speed and agility. GTT owns and operates a global Tier 1 internet network and provides a comprehensive suite of cloud networking services. For more information on GTT (NYSE: GTT), please visit www.gtt.net.
GTT Media Inquiries:
Marion Janic, RooneyPartners
Bob Cavosi, RooneyPartners
GTT Investor Relations:
Jody Burfening/Carolyn Capaccio, LHA