GTT Communications (GTT) Misses Q3 EPS by 25c, Revenues Miss

GTT Communications (NYSE: GTT) reported Q3 EPS of ($0.46), $0.25 worse than the analyst estimate of ($0.21). Revenue for the quarter came in at $420 million versus the consensus estimate of $425.7 million.

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.

For earnings history and earnings-related data on GTT Communications (GTT) click here.

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