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Alaska Communications Reports Solid Third Quarter 2016 Results

-Revenues of $56.5 million, a 3.2% increase- -Business and Wholesale Revenue growth of 8.3%-


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Alaska Communications Reports Solid Third Quarter 2016 Results

 

-Revenues of $56.5 million, a 3.2% increase-

-Business and Wholesale Revenue growth of 8.3%-

 

ANCHORAGE, Alaska, Nov. 2, 2016 -- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the third quarter of 2016.

 

“I am pleased to report another quarter of solid performance to our plan, furthering our record of delivering consistent results. For the third quarter 2016 compared to a year ago, revenue increased 3.2 percent, driven by an 8.3 percent increase for business and wholesale and a 14.0 percent increase for total broadband,” said Anand Vadapalli, president and CEO of Alaska Communications. 

 

On October 31, 2016, the Federal Communications Commission released its order for Connect America Fund Phase II (CAF II) for Alaska. The order is consistent with management’s expectations. The CAF II order continues high cost support at $19.7 million per year for the next ten years, in exchange for providing broadband to approximately 31,500 locations in unserved and partially served census blocks, representing approximately 26,000 new unserved locations.

 

“The issuance of the CAF II order eliminates uncertainty for the company in this regard while setting the stage for a significant deployment of broadband in Alaska. Our emphasis on customer service, combined with a superior fiber optic network and strong managed IT services capabilities, creates value for our customers and differentiation in the market. We look forward to reporting continued progress in upcoming quarters,” concluded Anand Vadapalli.

 

Revenue Highlights: Third Quarter 2016 Compared to Third Quarter 2015

  • Total revenues:
    • Revenue increased to $56.5 million, up 3.2 percent from $54.7 million.
    • Total broadband revenue reached $29.4 million, up 14.0 percent from $25.7 million.
  • Business and wholesale:
    • Comprised 60.3 percent of total revenue.
    • Revenue grew to $34.0 million, up 8.3 percent from $31.4 million.
    • Broadband revenues reached $23.1 million, up 18.5 percent from $19.5 million.
  • Consumer:
    • Comprised 16.6 percent of total revenue.
    • Revenue was $9.4 million, down 6.0 percent from $10.0 million.
    • Broadband revenue was $6.2 million for both periods.
  • Regulatory:
    • Comprised 23.1 percent of total revenue.
    • Revenue was $13.1 million, down 1.9 percent from $13.3 million.

 

Financial Metrics: Third Quarter 2016 compared to Third Quarter 2015 and Year to Date September 30, 2016

  • Net income was $0.3 million, compared to $1.2 million.  Year to date net income was $0.7 million.
  • Net cash provided by operating activities was $9.5 million, compared to $13.7 million. Year to date cash provided by operating activities was $28.4 million.
  • Capital expenditures were $8.7 million, compared to $12.1 million.  Year to date capital expenditures were $22.4 million.

 

Balance Sheet Metrics: September 30, 2016 compared to December 31, 2015

  • Cash remained strong at $21.9 million, compared to $36.0 million, primarily reflecting the repayment of $12.4 million of long-term debt.
  • Net debt was $163.3 million, compared to $161.7 million.

 

Non-GAAP Metrics: Third Quarter 2016 compared to Third Quarter 2015 and Year to Date September 30, 2016

  • Adjusted EBITDA was $13.9 million, compared to $12.6 million. Year to date Adjusted EBITDA was $41.8 million, up from $36.1 million.
  • Free cash flow for the quarter was $3.0 million, improving $5.2 million from a net outflow of $2.2 million. Year to date free cash flow was $7.0 million, improving $10.9 million from a net outflow of $3.8 million.

 

Reconciliations of non-GAAP financial measures to GAAP financial measures can be found in tables at the end of this release and on the company’s website at http://www.alsk.com in the investment data section.

 

Laurie Butcher, Alaska Communications senior vice-president of finance, said, “Our results for the quarter are tracking to our expectations. This year we are meeting our performance targets in a more capital efficient manner; therefore, we have adjusted our capital spending and free cash flow guidance. We believe our continued emphasis on growing Free Cash Flow will drive shareholder value.”

 

2016 Guidance:

The company updated guidance as follows:

  • Confirmed Total Wireline Revenue of approximately $228 million
  • Confirmed Adjusted EBITDA of approximately $59 million
  • Updated Capital Expenditures from approximately $35 million to approximately $32 million
  • Increased Free Cash Flow from approximately $5 million to approximately $8 million

 

Conference Call

The Company will host a conference call and live webcast on Wednesday, Nov. 2, 2016 at 5:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-888-542-1138 and enter pass code 461984. All other parties can access the call at 1-719-457-2728 and use the same code.

The live webcast of the conference call will be accessible from the "Events Calendar" section of the Company's website (www.alsk.com). The webcast will be archived for a period of 90 days. A telephonic replay of the conference call will also be available two hours after the call and will run until Dec. 2, 2016 at 8:00 p.m. Eastern Time. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter pass code 6806229. All other parties can call 1-719-457-0820 and enter pass code 6806229.

 
About Alaska Communications

Alaska Communications (NASDAQ: ALSK) is the leading provider of advanced broadband and managed IT services for businesses and consumers in Alaska. The company operates a highly reliable, advanced statewide data network with the latest technology and the most diverse undersea fiber optic system connecting Alaska to the contiguous U.S. For more information, visit www.alaskacommunications.com or www.alsk.com.

 

Non-GAAP Measures

In an effort to provide investors with additional information regarding our financial results, we have provided certain non-GAAP financial information, including Adjusted EBITDA, Free Cash Flow and Net Debt. Adjusted EBITDA and Free Cash Flow measure the Company’s primary business activities without regard for the effects of special items and income tax structure. Adjusted EBITDA eliminates the effects of period to period changes in costs that are not directly attributable to the underlying performance of the Company’s business operations and is used by Management and the Company’s Board of Directors to evaluate current operating financial performance, analyze and evaluate strategic and operational decisions and better evaluate comparability between periods. Free Cash Flow is used to assess the Company’s ability to generate cash and plan for future operating and capital actions. Adjusted EBITDA and Free Cash Flow are common measures utilized by our peers (other telecommunications companies) and we believe they provide useful information to investors and analysts about the Company’s operating results, financial condition and cash flows. Net Debt provides Management and the Board of Directors with a measure of the Company’s current leverage position. The definition of these non-GAAP measures is provided on Schedules 4, 5 and 9 to this press release. Adjusted EBITDA and Free Cash Flow should not be considered a substitute for Net Income, Net Cash Provided by Operating Activities and other measures of financial performance recorded in accordance with GAAP. Reconciliations of our non-GAAP measures to our nearest GAAP measures can be found in the tables in this release and on our website in the investment data section. Other companies may not calculate non-GAAP measures in the same manner as Alaska Communications. The Company does not provide reconciliations of guidance for Adjusted EBITDA to Net Income, and Free Cash Flow to Net Cash from Operating Activities, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K. The Company does not forecast certain items required to develop the comparable GAAP financial measures. These items are realized and unrealized gains and losses on effective and ineffective hedges, charges and benefits for uncollectible accounts, certain other non-cash expenses, unusual items typically excluded from Adjusted EBITDA and Free Cash Flow, and changes in operating assets and liabilities (generally the most significant of these items, representing cash outflows of $1.7 million and $2.5 million in the nine-month periods of 2016 and 2015, respectively).

 

Forward-Looking Statements

This press release includes certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made using information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside the Company’s control. Such factors include, without limitation, Federal and Alaska Universal Service Fund changes, adverse economic conditions, the effects of competition in our markets, our relatively small size compared with our competitors, the Company’s ability to compete, manage, integrate, market, maintain, and attract sufficient customers for its products and services, adverse changes in labor matters, including workforce levels, our ability to service our debt and refinance as required, labor negotiations, including renegotiating our collective bargaining agreement, employee benefit costs, our ability to control other operating costs, disruption of our supplier’s provisioning of critical products or services, the impact of natural or man-made disasters, changes in Company's relationships with large customers, unforeseen changes in public policies, regulatory changes, changes in technology and standards, our internal control over financial reporting, and changes in accounting standards or policies, which could  affect reported financial results. For further information regarding risks and uncertainties associated with the Company’s business, please refer to the Company's SEC filings, including, but not limited to, the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of the Company's SEC filings may be obtained by contacting its investor relations department at (907) 564-7556 or by visiting its investor relations website at www.alsk.com.

 

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