GTT Communications, Inc. CAPEX jumped on 85% and Revenue jumped on 80.1%
02/28/2019 • About GTT Communications, Inc. (
$GTT) • By InTwits
GTT Communications, Inc. reported 2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- GTT Communications, Inc. is a fast growth stock: 2018 revenue growth was 80.1%, 5 year revenue CAGR was 56.8% at 2018 ROIC 1.5%
- GTT Communications, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.3%. At the same time it's in pair with industry average of 5.2%
- CAPEX is quite volatile: $78m in 2018, $42m in 2017, $24m in 2016, $14m in 2015, $6m in 2014
- In the last 5 years the company invested considerably less than D&A: $164m vs. $478m. In 2018 this situation was still the same: CAPEX was 78 while D&A was 211
- The company has potentially unprofitable business model: ROIC is 1.5%
- It operates with high leverage: Net Debt/EBITDA is 12.7x while industry average is 2.9x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
GTT Communications, Inc.'s Revenue jumped on 80.1%. Revenue growth showed acceleration in 18Q4 - it increased 82.5% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 2.2 pp from 19.1% to 16.8% in 2018. During 2014-2018 EBITDA Margin topped in 2016 at 19.9% and was declining since that time.
Gross Margin decreased on 2.8 pp from 47.8% to 45.0% in 2018. During the last 5 years Gross Margin topped in 2017 at 47.8%. SG&A as a % of Revenue showed almost no change in 2018. During 2014-2018 SG&A as a % of Revenue topped in 2015 at 27.5% and was declining since that time. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in 2018. During the last 5 years SBC as a % of Revenue topped in 2016 at 3.0% and was declining since that time.
Net Income margin decreased on 7.7 pp from -8.6% to -16.3% in 2018. During the last 5 years Net Income margin topped in 2015 at 5.2% and was declining since that time.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 5.2% in 2018. CAPEX/Revenue increased slightly on 1.4 pp from 3.8% in 2015 to 5.2% in 2018. Average CAPEX/Revenue for the last three years was 5.0%. CAPEX as a % of Revenue followed a growing trend at 0.61 pp per annum in the last 5 years.
Accounts receivable as a % of Revenue increased slightly on 0.83 pp from 10.9% to 11.7% in 2018. Accounts payable as a % of Revenue increased on 5.7 pp from 5.2% to 10.9% in 2018.
GTT Communications, Inc. has spent
$2,243m on M&A in 2018 which accounts for 150% of revenue.
Return on investment
The company operates at low but positive ROIC (1.5%) and negative ROE (-75.3%). ROIC decreased slightly on 0.62 pp from 2.2% to 1.5% in 2018. ROE dropped on 35.5 pp from -39.8% to -75.3% in 2018. During the last 5 years ROIC topped in 2016 at 6.0% and was declining since that time. During 2014-2018 ROE topped in 2015 at 20.5% and was declining since that time.
Leverage (Debt)
Company's Net Debt / EBITDA is 12.7x and Debt / EBITDA is 12.9x. Net Debt / EBITDA jumped on 5.4x from 7.2x to 12.7x in 2018. Debt surged on 160% while cash dropped on 45.4%. Net Debt/EBITDA stuck to a growing trend at 1.9x per annum in 2014-2018.
GTT Communications, Inc. has no short term refinancing risk: cash is higher than short term debt (118.7%).
Management team
Richard D Calder Jr "Rick" is a GTT Communications, Inc.'s CEO. Richard D Calder Jr "Rick" is a founder and has spent 12 years with the company. CEO total compensation was
$9,160,743 in 2018 which included
$575,000 salary. The company's CFO is Michael T Sicoli "Mike". Michael T Sicoli "Mike" has 4 years tenure at the company.
19.2% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 3,200 employees. The number of employees jumped on 155%. Average revenue per employee in 2018 was
$465,875 and it dropped on 29.3%.
Financial and operational results
FY ended 12/31/2018
GTT Communications, Inc. ($GTT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 207 | 369 | 522 | 828 | 1,491 | 80.1% |
| Gross Profit | 79 | 165 | 248 | 396 | 671 | 69.6% |
| SG&A | 46 | 102 | 143 | 215 | 383 | 77.9% |
| EBITDA | 24 | 50 | 104 | 158 | 251 | 58.9% |
| EBIT | -1 | 4 | 41 | 25 | 40 | 56.3% |
| Tax | 2 | -34 | 4 | 17 | -6 | -131.8% |
| Net Income | -23 | 19 | 5 | -72 | -243 | |
| Stock Based Compensation | 2 | 8 | 16 | 16 | 29 | 78.1% |
Balance Sheet
|
|---|
| Cash | 49 | 15 | 30 | 101 | 55 | -45.4% |
| Accounts Receivable | 29 | 60 | 76 | 90 | 175 | 93.9% |
| Accounts Payable | 20 | 23 | 11 | 23 | 89 | 296.4% |
| Short Term Debt | 6 | 5 | 5 | 9 | 47 | 448.2% |
| Long Term Debt | 117 | 383 | 725 | 1,237 | 3,187 | 157.7% |
Cash flow
|
|---|
| Capex | 6 | 14 | 24 | 42 | 78 | 85.0% |
| Acquisitions | 37 | 301 | 14 | 706 | 2,243 | 217.5% |
Ratios
|
|---|
| Revenue growth | 31.8% | 78.1% | 41.3% | 58.7% | 80.1% | |
| EBITDA growth | 59.3% | 108.1% | 105.5% | 52.5% | 58.9% | |
|
|---|
| Gross Margin | 38.2% | 44.6% | 47.5% | 47.8% | 45.0% | -2.8% |
| EBITDA Margin | 11.7% | 13.7% | 19.9% | 19.1% | 16.8% | -2.2% |
| EBIT Margin | -0.3% | 1.0% | 7.8% | 3.1% | 2.7% | -0.4% |
| SG&A, % of revenue | 22.0% | 27.5% | 27.4% | 26.0% | 25.7% | -0.3% |
| SBC, % of revenue | 1.2% | 2.1% | 3.0% | 1.9% | 1.9% | -0.0% |
| Net Income Margin | -11.1% | 5.2% | 1.0% | -8.6% | -16.3% | -7.7% |
| CAPEX, % of revenue | 2.8% | 3.8% | 4.6% | 5.1% | 5.2% | 0.1% |
|
|---|
| ROIC | -0.5% | 1.1% | 6.0% | 2.2% | 1.5% | -0.6% |
| ROE | -52.8% | 20.5% | 4.4% | -39.8% | -75.3% | -35.5% |
| Net Debt/EBITDA | 3.1x | 7.4x | 6.8x | 7.2x | 12.7x | 5.4x |
People
|
|---|
| Insider ownership | 19.2% | 19.2% | 19.2% | 19.2% | 19.2% | 0.0% |
| Employees | 294 | 572 | 662 | 1,257 | 3,200 | 154.6% |
| Revenue/Employee, th. $ | 705 | 646 | 788 | 659 | 466 | -29.3% |
GTT Communications, Inc. ($GTT) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 261 | 327 | 449 | 455 | | 40.2% | 71.9% | 121.4% | 82.5% |
| EBITDA | 49 | 52 | 73 | 77 | | 78.8% | 13.9% | 103.9% | 57.4% |
| Net Income | -31 | -136 | -23 | -53 | | | -19,571.4% | | |
Balance Sheet
|
|---|
| Cash | 54 | 74 | 48 | 55 | | 65.0% | -43.6% | 37.1% | -45.4% |
| Short Term Debt | 8 | 50 | 48 | 47 | | 2.4% | 479.3% | 451.6% | 448.2% |
| Long Term Debt | 1,236 | 3,159 | 3,152 | 3,187 | | 29.6% | 184.7% | 184.1% | 157.7% |
Ratios
|
|---|
| Gross Margin | 45.7% | 45.1% | 44.9% | 44.8% | | -3.2% | -3.7% | -3.9% | -0.7% |
| EBITDA Margin | 18.8% | 16.0% | 16.3% | 16.9% | | 4.1% | -8.2% | -1.4% | -2.7% |
| Net Income Margin | -11.8% | -41.7% | -5.2% | -11.7% | | -4.7% | -42.1% | -0.5% | 8.2% |
Peers in Internet Services & Infrastruc
Below we provide GTT Communications, Inc. benchmarking against other companies in Internet Services & Infrastruc industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | | 20.4% | 108.0% |
| MongoDB, Inc. ($MDB) | | | | 55.3% | 63.8% |
| Twilio Inc. ($TWLO) | | 87.9% | 66.1% | 43.9% | 62.9% |
| Okta, Inc. ($OKTA) | | | 109.5% | 86.6% | 60.0% |
| Wix.com Ltd. ($WIX) | | 43.5% | 42.5% | 46.7% | 41.8% |
| |
|---|
| Median (15 companies) | 25.5% | 11.7% | 13.3% | 10.6% | 16.9% |
|---|
| GTT Communications, Inc. ($GTT) | | 78.1% | 41.3% | 58.7% | 80.1% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Liberated Syndication Inc ($LSYN) | | | 68.1% | 77.5% | 84.9% |
| VeriSign, Inc. ($VRSN) | 81.3% | 81.8% | 82.6% | 83.4% | 84.2% |
| Wix.com Ltd. ($WIX) | 81.6% | 82.8% | 84.4% | 83.7% | 79.0% |
| MongoDB, Inc. ($MDB) | | | 68.0% | 70.5% | 74.2% |
| Carbonite, Inc. ($CARB) | 68.5% | 71.6% | 70.6% | 70.7% | 71.2% |
| |
|---|
| Median (15 companies) | 53.1% | 55.4% | 61.5% | 65.0% | 66.4% |
|---|
| GTT Communications, Inc. ($GTT) | 38.2% | 44.6% | 47.5% | 47.8% | 45.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 62.2% | 63.0% | 65.2% | 65.0% | 67.1% |
| Liberated Syndication Inc ($LSYN) | | | 32.0% | -29.9% | 32.2% |
| Internap Corporation ($INAP) | 20.0% | 21.0% | -5.4% | 28.4% | 30.5% |
| Akamai Technologies, Inc. ($AKAM) | 37.5% | 34.8% | 33.9% | 27.6% | 29.4% |
| Endurance International Group Holdings, Inc. ($EIGI) | 23.2% | 24.0% | 14.8% | 20.0% | 26.0% |
| |
|---|
| Median (15 companies) | 4.5% | 1.3% | -5.1% | -7.1% | 14.4% |
|---|
| GTT Communications, Inc. ($GTT) | 11.7% | 13.7% | 19.9% | 19.1% | 16.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Akamai Technologies, Inc. ($AKAM) | 16.2% | 20.2% | 13.5% | 16.7% | 14.9% |
| 21Vianet Group, Inc. ($VNET) | 32.6% | 29.0% | 15.8% | 11.7% | 12.8% |
| Internap Corporation ($INAP) | 24.0% | 17.5% | 14.9% | 12.7% | 12.1% |
| Limelight Networks, Inc. ($LLNW) | 11.5% | 14.5% | 5.7% | 11.2% | 8.2% |
| Carbonite, Inc. ($CARB) | 11.8% | 7.1% | 3.2% | 7.2% | 4.4% |
| |
|---|
| Median (15 companies) | 4.4% | 3.8% | 3.3% | 3.8% | 3.0% |
|---|
| GTT Communications, Inc. ($GTT) | 2.8% | 3.8% | 4.6% | 5.1% | 5.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| VeriSign, Inc. ($VRSN) | 60.6% | 68.7% | 65.2% | 54.3% | 81.9% |
| Liberated Syndication Inc ($LSYN) | | | | -13.2% | 12.1% |
| Akamai Technologies, Inc. ($AKAM) | 15.5% | 12.5% | 11.9% | 7.9% | 8.2% |
| Endurance International Group Holdings, Inc. ($EIGI) | 1.0% | 4.2% | -2.3% | 2.0% | 7.5% |
| GoDaddy Inc. ($GDDY) | -3.3% | -1.7% | 2.9% | 2.7% | 4.6% |
| |
|---|
| Median (16 companies) | -3.0% | -6.9% | -18.5% | -14.6% | 1.0% |
|---|
| GTT Communications, Inc. ($GTT) | -0.5% | 1.1% | 6.0% | 2.2% | 1.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Internap Corporation ($INAP) | 5.1x | 5.3x | | 6.5x | 6.9x |
| Endurance International Group Holdings, Inc. ($EIGI) | 7.3x | 6.0x | 11.8x | 7.8x | 5.8x |
| GoDaddy Inc. ($GDDY) | 14.0x | 5.4x | 2.3x | 6.8x | 3.9x |
| VeriSign, Inc. ($VRSN) | 1.9x | 2.5x | 2.2x | 2.6x | 1.8x |
| 21Vianet Group, Inc. ($VNET) | 10.7x | 5.6x | | | 1.0x |
| |
|---|
| Median (9 companies) | 3.5x | 2.5x | 1.3x | 2.6x | 1.0x |
|---|
| GTT Communications, Inc. ($GTT) | 3.1x | 7.4x | 6.8x | 7.2x | 12.7x |
