Investor Briefing

Investor
Presentation
January 2015
Disclaimer
Forward-Looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements
relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by
forward-looking words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “intend,” “estimate,”
“predict,” “potential” or “continue,” the negative of such terms or other comparable terminology, although not all forwardlooking statements contain these words. These statements are only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assume responsibility
for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the
forward-looking statements after the date of this presentation to conform such statements to actual results or to changes in our
expectations. 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. You are also urged to carefully review and consider the various
disclosures made by us that attempt to advise interested parties of the factors that affect our business, including without
limitation the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2013 under the caption
“Risk Factors.” Factors that could cause actual results to differ from those contained in the forward-looking statements include,
but are not limited to: 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; our ability to obtain capital to grow our business;
technological developments and changes in the industry; our ability to complete acquisitions or divestures and to integrate any
business or operation acquired; and general economic conditions. In light of the significant risks and uncertainties to which our
forward-looking statements are subject, you should not place undue reliance on or regard these statements as a representation
or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. These
forward-looking statements represent our estimates and assumptions only as of the date of this presentation regardless of any
sale of our securities and, except as required by law, we undertake no obligation to update or revise publicly any forwardlooking statements, whether as a result of new information, future events or otherwise after the date of this presentation. For all
forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
2
GTT At-a-Glance
Overview
GTT operates a global Tier 1 IP network connecting to any location in the world and
with any application in the cloud.
Our cloud networking services provide a better way for multinational clients to
embrace the cloud.
Our clients trust us to deliver solutions with simplicity, speed and agility so they can
compete effectively in the global economy.
Investment Highlights
Significant
Market
Opportunity
Compelling
Business
Strategy
Proven Track
Record
Experienced
Substantial
Management
Growth
Opportunity
Team
Superior
Financial
Profile
3
GTT Global Network
200+
55
Points of Presence
(PoPs)
Major Markets
100+
Country Deployments
1,000+
Global Partners for Last
Mile Connections
100G/10G
Multiple, Diverse Waves
Interconnecting POPs
100%
Juniper Core Network
Americas
Atlanta, Boston, Chicago, Dallas, Denver, Houston, Las Vegas, Los Angeles,
Miami, Minneapolis, Montreal, New York, Philadelphia, Phoenix, Salt Lake
City, San Francisco, San Jose, Seattle, Toronto, Vancouver, Washington DC
Europe
Amsterdam, Antwerp, Barcelona, Basel, Berlin, Bratislava, Brussels,
Bucharest, Cagliari, Copenhagen, Dublin, Dusseldorf, Hamburg, Frankfurt,
London, Madrid, Manchester, Marseille, Milan, Munich, Oslo, Paris, Prague,
Rome, Sofia, Stockholm, Turin, Vienna, Vilnius, Warsaw, Zurich
Asia
Hong Kong, Singapore, Tokyo
4
Our Services
Internet Services
Top 5 Internet Backbone in the World
EtherCloud Services
Connectivity to any location in the world
and with any application in the cloud
Managed Services
Complete Turnkey Solutions
Private, public and hybrid
wide-area-network solutions
 Guaranteed bandwidth with ondemand, burstable capacity
Over one-third of Internet destinations are
carried on GTT’s backbone
 Global Tier 1 IP network provider
 Advanced BGP communities
 Deep peering relationships
(1) Source: Renesys Independent research firm
 Ethernet and IP-VPN technologies
 Performance, Security, Reliability
 Over 1,000 regional partners to extend
network reach
 Managed Router Service
 Managed Firewall Service
 Managed Security Service
Providing fully managed network
services so organizations can focus
on their core business
5
Cloud Networking
Worldwide Client Locations
Public Internet
Headquarter Offices
Cloud Service Providers
Internet
Services
EtherCloud®
Services
Branch Offices
Cloud Delivery Network
Public Internet
Private Wide-Area Networks
Client locations with Managed Services
6
Rapid Growth in IP and Cloud Traffic
 Global IP traffic increased more than fivefold from 2008-2013, and is forecasted to grow by more than 2.5x
by 2018
 Number of devices connected to IP networks is forecasted to be nearly twice as high as the global
population in 2018
 By 2018, more than three-quarters of IT workloads are forecasted to be processed within cloud data centers
with global cloud traffic forecasted to grow at a CAGR of 32%
Global IP Traffic (Exabytes per Year)
1,750
1,579
1,500
5,131
5,000
909
614
6,496
6,000
1,095
1,000
8,000
7,000
1,320
1,250
750
Global Cloud Traffic (Exabytes per Year)
3,994
4,000
750
3,050
3,000
500
2,000
250
1,647
2,277
1,000
0
0
2013
2014
2015
2016
2017
2018
2013
2014
2015
2016
Sources: Cisco Visual Networking Index: Forecast and Methodology, 2014; Cisco Global Cloud Index: Forecast and Methodology, 2014
2017
2018
7
Growth Strategy
► Extend ubiquitous network connectivity to any location in
the world and with any application in the cloud
► Expand cloud networking services to multinational clients
► Deliver outstanding client experience by living our core
values of simplicity, speed and agility
Execute growth strategy organically and through selective acquisitions
Next Financial Objective:
$400 Million in Revenue, $100 Million in Adjusted EBITDA
8
Powering Global Business
Cloud Networking for Big Blue
IBM is the leading enterprise platform for cloud
computing services
•
IBM selected GTT as its network partner to
expand cloud computing services to over 100
data centers worldwide
•
Complements IBM’s public, private and hybrid
cloud services to clients
•
Carrier-grade performance, reliability and
reach ensures the highest level of enterprise
cloud services available globally
Supporting Round-the-Clock Digital Workflows
Deluxe Entertainment Services Group is the industry’s
leading provider of digital media and entertainment
services
•
Manage, monitor and configure the production
and corporate networks
•
Power Deluxe Express, a rapid file transfer service
that delivers encrypted digital files between
studios, shoot locations, and post-production
facilities within minutes instead of days
Always Available Online Auctions
Phillips is a high-end international contemporary
art auction house in New York and London
•
Stringent uptime and availability requirements
to ensure uninterrupted transactions for online
auctions
Accessing the Leading Cloud Applications
Equinix is the leading Interconnection Data
Center & Global Colocation Services provider
•
Equinix identified GTT as a “must have partner’
because of GTT’s dominant data center
presence and global network reach
•
GTT’s ubiquitous network and broad reach
provides clients with direct connectivity to
thousands of cloud service providers
Optimize Cloud Access
LiveOps is the global leader in cloud contact center
and customer service solutions
•
20,000 independent agents supporting more than
300 global clients
•
VPLS solution connects LiveOps data centers
around the world to guarantee all information,
databases and client profiles are continuously in
sync and backed-up
•
Fully redundant network architecture – dual
access, dual entrance facilities, dual PoPs, dual
edge routers
•
Redundant and diverse network backbone
•
Private VLANs isolate LiveOps’ 300+ clients
•
Dedicated Internet Access (DIA)
•
Private, direct connection to Amazon Web
Services (AWS)
Lightning Fast Connectivity
Amica Mutual Insurance Company is the leading
provider of consumer, property, casualty marine
and auto insurance in the United States
•
Fully meshed MPLS IP-VPN solution for private
connectivity between headquarters, its 42
sales offices and data centers
•
Increased bandwidth speeds enables more
claims process per day, higher employee
productivity and greater customer satisfaction
9
Accelerate Growth Through M&A
Selected Acquisition History
M&A Growth Strategy
 Extend ubiquitous network
connectivity worldwide
April 2013
June 2011


2009
Broadened global customer
base to over 1,200 clients
Expanded portfolio of
global Ethernet and cloud
networking service
2010
2011
 Expand cloud networking service
platform


Added Top 5 global Tier 1 IP
network
Extended network reach
with over 120 PoPs in 24
countries
2012
2013
 Grow salesforce and multinational
client base
2014
Proven Approach
 Focus on post-synergy EBITDA
generation
December 2009


Portfolio of IP and Ethernet
services
Added 60 PoPs across North
America, Asia and Europe
April 2012


Expanded IP and Ethernet
services portfolio
Extended global network
coverage and scale
October 2014


Expanded service portfolio
with ubiquitous broadband
capability
Added enhanced
managed services
capabilities
 Rapidly integrate organization,
brand, systems/processes and
networks
 Complete integration within two
quarters post-close
10
Experienced Team
Management
Board of Directors
Rick Calder | President and CEO
Brian Thompson
 Joined GTT in May 2007
 Previous senior roles with InPhonic, Broadwing, Winstar, Tellabs, GO Communications and MCI
 Over 25 years telecom experience
 Executive Chairman of GTT since 2005
 Previous leadership roles at Comsat, Global TeleSystems, LCI, Qwest and MCI
 Board positions at Axcelis, Pendrell, Penske and Sonus Networks
Chris McKee | General Counsel and EVP, Corporate Development
Rick Calder
 Joined GTT in April 2008
 Previous experience includes StarVox, Covad Communications, XO Communications and Net2000
 Over 20 years broad legal experience
 President and CEO of GTT Communications
Michael Bauer | Chief Financial Officer
Morgan O’Brien
 Joined GTT in January 2008
 Previous experience includes MeriStar Hospitality, Arthur Andersen, Sprint and OneMain.com
 Over 18 years finance and accounting experience, Certified Public Accountant
 Executive Vice Chairman at Pacific DataVision
 Co-founder of Nextel Communications
 Board of trustees of The Field School and the Law Board of Northwestern University
School of Law
Layne Levine | EVP, Americas Business Unit
Howard Janzen
 Joined GTT in November 2012
 Previous experience includes Alpheus, Deltacom/Earthlink, Airband, Level 3 and Broadwing
 Over 20 years experience leading sales teams
 President and CEO of Cool Planet
 Former CEO of One Communications
 Board of directors of Sonus Networks, Vocera Communications and Anyware Mobile
Solutions
Andy Johnson| Managing Director, EMEA/APAC Business Unit
Rhodric Hackman
 Joined GTT in June 2011
 Previous experience includes PacketExchange, PSINet Europe, Level 3, 3Com and Motorola
 Over 18 years telecom experience
 Co-founded Mercator Capital
 Served as Co-Head of Communications and Media Investment Banking at PWC
Corey Eng| Chief Marketing Officer
S. Joseph Bruno
 Joined GTT in April 2013
 Previous experience includes Comcast, InPhonic, Nextel, Broadwing, Winstar, GO Communications and MCI
 Over 20 years marketing and product management experience in telecom and technology
 President and CEO of Building Hope
 Board of DC Prep Charter School, the Center City Public Charter Schools,
Georgetown University Hospital and Intergroup Service
 Certified Public Accountant and former partner of KPMG Peat Marwic
Bob Burris| SVP, Network Engineering and Operations
Theodore B. Smith, III
 Joined GTT in June 2014
 Previous experience includes Harris Caprock Communications, Arbinet, and Cable and Wireless
 Over 30 years of telecom-related network operational and engineering experience
 Chairman and CEO of John Hassall, a privately held manufacturer of custom formed
and machined metal parts
 Various positions in manufacturing and sales for John Hassall, including President
11
Superior Financial Profile
Highly Recurring
Revenue
 High (approx. 90%) monthly recurring revenue (MRR) provides visibility and
stability
 High customer retention resulting in consistently low churn rates
 High incremental margins driven by sales leverage on core network
Significant
Operating Leverage
 Efficient support services driven by proprietary Client Management
Database (CMD)
 Expanding gross margins and EBITDA margins
Capital Efficient
Model
 Strong Unlevered Free Cash Flow generation (1)
 Capital expenditures historically less than 3% of revenue
 Minimal incremental costs necessary to support higher traffic volumes
(1) Unlevered Free Cash Flow defined as Adjusted EBITDA less capital expenditures
12
Annual Financial Highlights
($ in Millions)
Revenue (1)
Gross Profit (1)
$196.6
$77.2
$157.4
$64.2
2009
$81.1
$91.2
$54.6
$107.9
$18.4
2010
2011
2012
2013
$24.1
$27.0
39.3%
34.7%
28.6%
29.7%
2009
2010
2011
Gross Profit
LQA
$31.9
Adjusted EBITDA (1)(2)
29.6%
29.5%
2012
2013
Gross Margin
Unlevered FCF (1)(3)
$35.8
$34.1
$24.3
$13.5
$4.2
$6.7
$9.1
6.6%
8.2%
10.0%
2009
2010
2011
Adj. EBITDA
12.5%
15.5%
$20.3
18.2%
$3.8
5.9%
2012
LQA
2013
LQA
Adj. EBITDA Margin
(1) LQA represents Q3 2014 annualized results
(2) Adjusted EBITDA excludes one-time and non-cash charges
(3) Unlevered Free Cash Flow defined as Adjusted EBITDA less capital expenditures
2009
$6.5
8.0%
$8.6
9.4%
2010
2011
Unlevered FCF
$11.7
17.3%
10.8%
12.9%
2012
2013
LQA
Unlevered FCF Margin
13
Quarterly Financial Highlights
($ in Millions)
Gross Profit
Revenue
$47.5
$45.1
$48.1
$49.2
$46.1
$15.6
34.6%
3Q13
4Q13
1Q14
2Q14
3Q14
3Q13
36.2%
37.1%
4Q13
1Q14
Adjusted EBITDA (1)
$8.4
$7.6
16.9%
3Q13
$17.6
$16.7
4Q13
Adj. EBITDA
17.7%
1Q14
$19.3
38.7%
39.2%
2Q14
3Q14
Unlevered FCF (2)
$8.5
$8.9
$8.6
$7.6
$8.0
17.4%
$18.6
17.9%
2Q14
18.2%
3Q14
Adj. EBITDA Margin
(1) Adjusted EBITDA excludes one-time and non-cash charges
(2) Unlevered Free Cash Flow defined as Adjusted EBITDA less capital expenditures
$6.7
$6.2
$6.3
13.7%
13.7%
14.1%
3Q13
4Q13
1Q14
Unlevered FCF
17.3%
15.8%
2Q14
3Q14
Unlevered FCF Margin
14
Diversified Revenue Mix
Customer Type
Service Offering
Geography
6%
10%
55%
35%
13%
45%
55%
35%
46%
Enterprise
Carrier
Government
Note: Revenue mix based on Q3 2014 reported
EtherCloud
Internet (IP)
Private Line
Managed Service / Other
U.S.
Rest of World
15
Balance Sheet Highlights
($ in Millions)
As of September 30, 2014
Cash
August 6, 2014: Debt Refinancing
$ 41.6
Current assets
Total assets
Current liabilities
Total debt
Total liabilities
Stockholders’ equity(1)
70.8
211.4
54.6
125.0
177.0
34.3
 $170MM, 5-year senior debt facility
 $110MM term loan
 $15MM delayed draw term loan
 $15MM revolving line-of-credit
 $30MM accordion feature
 Eliminated all outstanding warrants
 Reduced cost of debt by 350bps from
approximately 8.0% to 4.5% (LIBOR+425bps)
October 1, 2014: UNSi Acquisition
 $40MM purchase price
 $2.9MM paid in stock
 $4.0MM hold back for undisclosed
liabilities
Modest Leverage and Ample Liquidity
(1) As of November 12, 2014, GTT had 29.1 million common shares outstanding and 1.4 million employee stock options outstanding
16
Investment Highlights
Significant
Market
Opportunity
 Global IP traffic is forecasted to grow by more than 2.5x by 2018(1)
 Large growing market for EtherCloud and Internet Services
 Growing demand from enterprise, carrier and government clients
Compelling
Business
Strategy
 Global Tier 1 IP Network with Top 5 Internet Backbone(2)
 Serving multinational clients underserved by global incumbents, unserved by regional carriers
 Trusted by clients to deliver solutions with simplicity, speed and agility
Proven Track
Record
Experienced
Management
Team
Superior
Financial
Profile
 Growth strategy executed through both organic growth and selective strategic acquisitions
 Proven ability to identify, acquire and accretively integrate acquisitions
 Large, diversified, blue-chip customer base
 Deep expertise managing high-growth communications businesses
 Long tenured and supportive Board of Directors
 Significant Management and Board investment in GTT
 Monthly recurring revenue model with expanding gross margins and EBITDA margins
 Low CapEx model delivering high Unlevered Free Cash Flow(3)
 Rapid historical CAGR: 25% Revenue and 55% Adjusted EBITDA(4) from 2009-2013
Next Financial Objective: $400 Million in Revenue, $100 Million in Adjusted EBITDA
(1)
(2)
(3)
(4)
Cisco Visual Networking Index: Forecast and Methodology, 2014
Sources: Renesys Independent research firm.
Unlevered Free Cash Flow defined as Adjusted EBITDA less capital expenditures
Adjusted EBITDA excludes one-time and non-cash charges
17
GAAP to Non-GAAP Reconciliation
Adjusted EBITDA & Unlevered Free Cash Flow
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.
In addition to Adjusted EBITDA, GTT management uses Unlevered Free Cash Flow, which measures the ability of Adjusted EBITDA to cover capital expenditures.
Adjusted EBITDA is a performance, rather than a cash flow measure. Correlating our capital expenditures to our Adjusted EBITDA does not imply that we will be
able to fund such capital expenditures solely with cash from operations.
The following is a reconciliation of Gross Profit, Adjusted EBITDA , and Unlevered Free Cash Flow:
($ in m illions)
Year Ended Decem ber 31,
Three Months Ended
September 30, December 31,
2009
Rev enue
$
Cost of telecommunications serv ices
Gross profit
64.2
$
45.9
$
Gross m argin
Net income (loss)
2010
18.4
$
0.5
$
$
24.1
$
1.4
$
91.2
$
27.0
$
0.3
2013
107.9
$
76.0
$
29.6%
0.1
(0.0)
2012
64.2
29.7%
0.0
Other expenses, net
81.1
57.0
28.6%
Prov ision for income taxes
2011
31.9
$
157.4
$
102.8
$
29.5%
0.6
2013
54.6
(20.8)
0.7
(2.0)
11.7
45.1
$
29.5
$
34.7%
(1.6) $
2013
15.6
$
29.4
$
34.5%
$
46.1
16.7
0.4
June 30,
2014
2014
47.5
$
29.9
$
36.2%
(4.3) $
March 31,
17.6
(2.4)
2014
48.1
$
29.5
$
37.0%
(3.7) $
September 30,
18.6
$
38.7%
(9.7) $
1.0
49.2
29.9
19.3
39.2%
$
(6.6)
0.7
(0.5)
0.6
(0.6)
0.2
0.4
0.2
1.1
3.4
5.5
8.9
Loss on debt extinguishment
-
-
-
-
0.7
-
-
-
-
3.1
Interest expense, net
0.8
1.4
2.5
4.7
8.4
2.4
2.8
2.4
2.6
1.8
Interest and other, net
0.8
1.8
2.7
5.7
20.8
5.9
8.3
11.3
2.0
5.1
Depreciation and amortization
1.7
2.8
3.9
7.3
17.2
5.2
5.3
5.6
5.5
5.9
EBITDA
$
3.0
$
6.0
$
7.4
$
12.2
$
15.2
$
7.2
$
7.4
$
7.9
$
7.9
$
4.9
Restructuring costs, employee termination, and other items
0.6
-
1.0
0.7
7.7
-
-
-
-
3.3
Non-cash compensation
0.6
0.6
0.7
0.6
1.5
0.4
0.6
0.5
0.7
0.7
Adjusted EBITDA
$
Capital expenditures
Unlev ered free cash flow
4.2
$
(0.4)
$
3.8
6.7
$
(0.2)
$
6.5
9.1
$
(0.5)
$
8.6
13.5
$
(1.8)
$
11.7
24.3
$
(4.1)
$
20.3
7.6
$
(1.3)
$
6.2
8.0
$
(1.7)
$
6.3
8.4
$
(1.7)
$
6.7
8.6
$
(0.9)
$
7.6
8.9
(0.4)
$
8.5
18