GCI reports fourth quarter 2013 financial results
• Consolidated revenue of $218 million, $812 million for the year
• Adjusted EBITDA of $68 million, $267 million for the year
March 5, 2014, Anchorage AK – General Communication, Inc. (“GCI”) (NASDAQ:GNCMA) today reported record performance for 2013, with fiscal year 2013 results of consolidated revenues of $812 million, adjusted EBITDA of $267 million, and net income of $9 million or $0.23 per diluted share. The EBITDA performance was slightly ahead of previously provided guidance. These results reflect the consolidation of The Alaska Wireless Network (“AWN”) transaction, which was effective July 23, 2013.
For the fourth quarter of 2013, revenue increased to $218 million or 19 percent over the fourth quarter of 2012. Adjusted EBITDA increased to $68 million or 28 percent over the fourth quarter of 2012. Net loss for the fourth quarter was $(7) million or $(0.17) per share.
“2013 has been a year of great significance for GCI, for many reasons. Record EBITDA is the most visible measure, but it was achieved on the basis of substantial investment and achievements in all areas of the business,” said Ron Duncan, GCI president and chief executive officer. “We are now prepared to realize the rewards of our investments in the network, in AWN, and in our operations.”
As mentioned above and previously announced, the AWN transaction closed on July 22nd, and was effective on July 23rd. This transaction combined the wireless networks of GCI and Alaska Communications (“ACS”). AWN provides wholesale wireless services to AWN’s owners, GCI and ACS, as well as roaming and backhaul service to other wireless carriers. This quarter is the first full quarter of AWN’s operations.
Wireless revenues of $62 million for the fourth quarter of 2013 decreased from the third quarter of 2013 revenues of $66 million, reflecting a full quarter of AWN operations but offset by the seasonality of roaming. Wireless Adjusted EBITDA of $28 million decreased from the third quarter 2013 Adjusted EBITDA of $37 million due to the lower margin contribution of less roaming, and the cost of customer acquisition by the retail partners.
For the fourth quarter of 2013, the revenue detail is as follows:
($ millions) 4Q 2013 4Q 2012 3Q 2013
Wholesale Wireless $24 $15 $22
Roaming and Backhaul $25 $10 $31
USF Support $13 $8 $13
Total Wireless Revenue $62 $33 $66
During the quarter, the company implemented many enhancements and improvements to the network, including:
• The system in the Juneau area was substantially upgraded, with LTE and expanded GSM/HSPA capabilities. LTE service is scheduled to go live in Fairbanks later this month.
• A new prepaid system was developed and implemented, which includes LTE data capability.
• The first rural 3G system was launched in Dillingham.
• 148 new TurboZones were turned up, for a total of 1,110 sites.
The Wireline segment posted revenues of $156 million for the fourth quarter of 2013, compared with $151 million for the same period in 2012, representing 3% growth. Adjusted EBITDA for the fourth quarter of 2013 was $40 million, a slight decline from 2012’s fourth quarter Adjusted EBITDA of $41 million, reflecting an increased allocation of operating expenses to this segment.
Wireline -- Consumer:
Consumer revenues of $69 million for the fourth quarter of 2013 represented a slight increase over the same period in 2012. Increases in data offset decreases in wireless, voice and video revenues.
During the quarter, the Company announced several campaigns and new programs:
• “March to a Gigabit” announced GCI’s commitment to providing gigabit data service, which was accompanied by an immediate increase to data speeds in many of the urban areas. Data speeds were again increased yesterday, up to 200Mps in some areas. Responses to the offering and the increases have been robust.
• While overall video had a slight decline, there has been an acceleration of demand for TiVo and TiVo box growth has been strong, which has helped reduce churn.
• GCI launched a new wireless prepaid platform, offering statewide service under the brand name FastPhone.
• Demand has also been strong for cellular-enabled tablets, including the iPad.
Wireline -- Business Services:
Business Services revenues of $56 million for the fourth quarter of 2013 increased 4 percent over the same period in 2012.
The fourth quarter reflected solid performance across all products, with cable advertising predictably strong throughout the holiday season. Overall, growth in the quarter was driven by video and voice, with data transport and storage charges also adding to the growth.
The Data revenue results can better be understood by examining the components of the category:
($ millions) 4Q 2013 4Q 2012 3Q 2013
Data Transport & Storage Charges $24 $23 $25
Professional Services $12 $15 $14
Total Data Revenue $36 $38 $39
Wireline -- Managed Broadband:
Managed Broadband revenues for the fourth quarter of 2013 totaled $30 million, an increase of 6 percent over the fourth quarter of 2012. This positive performance is driven in part by the expansion of and increasing demand for the TERRA services in rural Alaska.
On November 5th, GCI completed another phase of its terrestrial broadband network, TERRA, with full service extending to Nome. GCI expects to complete the next phase, to Kotzebue, by the end of 2014.
• Capital Expenditures for the year were $181 million, which included $16 million of grant funded expenditures, for a net of $165 million. $28 million of the capital expenditures were attributable to the Wireless segment and $137 million were attributable to the Wireline segment. This is slightly below the previously announced guidance.
• During 2013, the Company repurchased 1.8 million shares of GCI common stock, at a total cost of $15.6 million.
• Following the acquisition of KTVA-TV (CBS) by the company’s subsidiary, Denali Media, KTVA moved into a newly constructed, state of the art, high definition (HD) facility in December, and launched expanded HD news programming. KTVA is the first station in Alaska to present local news in HD.
• Denali Media also purchased KATH and KSCT, low power NBC affiliates in Juneau and Sitka.
The Company also provided guidance for 2014. With strong continued performance by all segments and customer groups, the Company is anticipating to achieve Consolidated Revenues in the range of $910 million to $930 million and Adjusted EBITDA in the range of $285 million to $305 million.
For capital expenditures, the base investment program is expected to be lower than last year, and should be $140 million to $150 million, down from the $165 million (net of grants) this past year. This does not include any real estate investment, as we continue to review our leased property portfolio. The Company has identified a unique opportunity in the wireless market to solidify its competitive position, and believes that an acceleration of the wireless build out is warranted, to bring full LTE service to 80% of Alaska. This is expected to accelerate approximately $30 million of planned expenditures from the outer years into 2014, bringing the total expected capital spend to about $170 million.
GCI will hold a conference call to discuss the quarter’s results on Thursday, March 6, 2014 beginning at 2 p.m. (Eastern). To access the briefing, call the conference operator between 1:50-2:00 p.m. (Eastern Time) at 877-918-2314 (International callers should dial +1-517-308-9338) and identify your call as “GCI.” In addition to the dial-up access, GCI will make available net conferencing. To access the call via net conference, log on to www.gci.com and follow the instructions. A replay of the call will be available for 72-hours by dialing 800-839-2291, access code 7461 (International callers should dial +1-402-998-1194.)
GCI is the largest Alaska-based and -operated, integrated telecommunications provider, offering voice, data and video services statewide. Learn more about GCI at www.gci.com/about.
Forward Looking Statement Disclosure
The foregoing contains forward-looking statements regarding GCI’s expected results that are based on management’s expectations as well as on a number of assumptions concerning future events. Actual results might differ materially from those projected in the forward looking statements due to uncertainties and other factors, many of which are outside GCI’s control. Additional information concerning factors that could cause actual results to differ materially from those in the forward looking statements is contained in GCI’s cautionary statement sections of Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
Posted: March 5, 2014