Alaska Communications Reports Fourth Quarter and Year-end 2019 Results

March 10, 2020 at 4:10 PM EDT
  • Delivers Strong Fourth Quarter Leading 2019 to Meet or Exceed Guidance
  • Reports Revenue of $231.7 Million and Net Income of $4.9 Million
  • Increases Adjusted EBITDA to $62.7 Million, Up from $60.2 Million in 2018
  • Posts Adjusted Free Cash Flow of $16.0 Million, Up from $7.2 Million in 2018
  • Increases in Fiber Miles 12% across Statewide Network in 2019 vs. 2018
  • The Board Approves One-time Dividend of $0.09 per share totaling ~$5 Million

ANCHORAGE, Alaska--(BUSINESS WIRE)-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the fourth quarter and full year ended December 31, 2019.

“We are pleased with strong 2019 results and achievements, driven by demand for fiber infrastructure and high-performance broadband growth. Our strategic initiatives contributed to better than expected Adjusted EBITDA and Adjusted Free Cash Flow. As a result, the Board approved a one-time $0.09 per share dividend, while continuing to invest in attractive value creating projects.

“With our customer centric approach and prefunded projects, we have accelerated our fiber footprint expansion by over 16,000 fiber miles in 2019, increasing to 146,000 fiber miles across Alaska and the Pacific Northwest. In 2020, we expect the strength of our fiber footprint and relationships to continue to improve results and sustain long-term growth for our shareholders,” said Bill Bishop, President & CEO.

Fourth Quarter 2019 Compared to Fourth Quarter 2018

  • Total revenue was $58.3 million, compared to $58.7 million, a decrease of 0.7%
    • Business and wholesale revenue was $38.3 million, compared to $37.0 million, up 3.5%.
    • Consumer revenue was steady at $9.2 million for both periods.
    • Regulatory revenue was $10.8 million, compared to $12.5 million, a decrease of 13.6%, as expected due to the restructuring of the Alaska Universal Service program.
  • Operating expenses were $51.3 million, compared to $53.8 million.
  • Operating income was $7.0 million, compared to $4.9 million.
  • Net income was $2.6 million, compared to $1.7 million.
  • Capital expenditures excluding prefunded projects were $10.0 million, compared to $12.5 million, which includes planned investments to continue our 5G wireless backhaul project.
  • Adjusted EBITDA was $17.9 million, compared to $14.1 million.
  • Adjusted Free Cash Flow was $9.7 million, including a tax refund of $5.1 million, compared to adjusted free cash outflow of $3.0 million.

Full Year 2019 Compared to Full Year 2018

  • Total revenue was $231.7 million, compared to $232.5 million, a decrease of 0.3%.
    • Business and wholesale revenue was $150.6 million, compared to $144.6 million, up 4.1%.
    • Consumer revenue was $37.0 million, compared to $37.3 million, a decrease of 0.8%.
    • Regulatory revenue was $44.1 million, compared to $50.6 million, a decrease of 12.8%, as expected due to the restructuring of the Alaska Universal Service program.
  • Operating expenses were $209.8 million, compared to $208.2 million.
  • Operating income was $22.0 million, compared to $24.3 million.
  • Net income was $4.9 million, compared to $9.1 million.
  • Capital expenditures excluding prefunded projects were $41.4 million, compared to $38.0 million, which includes planned investments to continue our 5G wireless backhaul project.
  • Adjusted EBITDA was $62.7 million, compared to $60.2 million.
  • Adjusted Free Cash Flow was $16.0 million, including a tax refund of $5.1 million, compared to $7.2 million. Compared to guidance, which was without prefunded projects or CEO severance, the company achieved $12.1 million.

Balance Sheet Highlights

  • Cash was $28.3 million at December 31, 2019, compared to $15.0 million at December 31, 2018.
  • Net debt was $153.8 million at December 31, 2019, compared to $161.2 million at December 31, 2018.

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 chief financial officer, said, “We met or exceeded our guidance in all areas for 2019. Business and wholesale revenue growth of 4.1% substantially offset anticipated decreases in regulatory revenue. Regulatory revenue declines are expected to have less of an impact in 2020 and future years.

“Also, in 2019, cost initiatives contributed to a 4.3% increase in Adjusted EBITDA and, combined with the AMT tax refund and net cash inflows associated with prefunded projects, drove an $8.7 million increase in Adjusted Free Cash Flow year over year. Our guidance for 2020 reflects our confidence for continued growth in total revenue and Adjusted EBITDA, while maintaining consistent capital expenditures, exclusive of prefunded projects.”

2019 Performance and 2020 Guidance

Operating Statement ($ in M)

2019 Guidance

2019 Performance

2020 Guidance

Total Revenue

$230 - $235

$231.7

$232 - $237

Adjusted EBITDA

$60 - $62

$62.7

$63 - $65

Capital Expenditures
(excluding prefunded projects)

$40 - $42

$41.4

$39 - $43

Adjusted Free Cash Flow
(excl. prefunded projects and CEO severance)

$10 - $12

$12.1

$8 - $10

Conference Call

The Company will host a conference call and live webcast on Wednesday, March 11, 2020 at 2:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-888-220-8474 and enter pass code 5227203. All other parties can access the call at 1-323-794-2588 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 30 days. A telephonic replay of the conference call will also be available two hours after the call and will run until April 10, 2020 at 5:00 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 5227203. All other parties can call 1-719-457-0820 and enter pass code 5227203.

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, Adjusted Free Cash Flow and Net Debt. 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. Adjusted Free Cash Flow is a non-GAAP liquidity measured used by Management and the Company’s Board of Directors to assess the Company’s ability to generate cash and plan for future operating and capital actions. Adjusted EBITDA and Adjusted 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 Company’s Board of Directors with a measure of the Company’s current leverage position. The definition and computation of these non-GAAP measures are provided on Schedules 4, 6 and 9 to this press release. Adjusted EBITDA and Adjusted 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. 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 Adjusted 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 charges and benefits for uncollectible accounts, certain other non-cash expenses, unusual items typically excluded from Adjusted EBITDA and Adjusted Free Cash Flow, and changes in operating assets and liabilities (generally the most significant of these items, representing cash inflows of $12.3 million in the twelve-month period of 2019).

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 changes in technology and related standards, the impact of natural or man-made disasters and accidents, Federal and Alaska Universal Service Fund changes and our current and historical compliance with the obligations of those programs, structural declines for voice and other legacy services, maintenance or IT issues, third-party intellectual property claims, potential pension shortfalls, the success or failure of future strategic transactions, funding through the rural health care universal service support mechanism and our ability to comply and our history of compliance with the regulatory requirements to receive those support payments, our ability to service our debt and refinance as required, adverse economic conditions, our success in providing broadband services on the Northslope and Western Alaska, 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, labor negotiations, employee benefit costs, our ability to control other operating costs, disruption of our supplier’s provisioning of critical products or services, the actions of activist shareholders, changes in Company's relationships with large customers, unforeseen changes in public policies, regulatory changes, 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.

Schedule 1
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED SCHEDULE OF OPERATIONS
(Unaudited, In Thousands Except Per Share Amounts)
 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

 
 
Operating revenues

$

58,262

 

$

58,689

 

$

231,694

 

$

232,468

 

 
Operating expenses:
Cost of services and sales (excluding depreciation and amortization)

 

26,847

 

 

27,914

 

 

105,615

 

 

107,509

 

Selling, general & administrative

 

14,512

 

 

17,249

 

 

66,718

 

 

66,647

 

Depreciation and amortization

 

9,851

 

 

8,572

 

 

37,276

 

 

33,908

 

Loss on disposal of assets, net

 

55

 

 

69

 

 

156

 

 

125

 

 
Total operating expenses

 

51,265

 

 

53,804

 

 

209,765

 

 

208,189

 

 
Operating income

 

6,997

 

 

4,885

 

 

21,929

 

 

24,279

 

 
Other income and (expense):
Interest expense

 

(2,910

)

 

(3,238

)

 

(12,059

)

 

(13,429

)

Loss on extinguishment of debt

 

-

 

 

-

 

 

(2,830

)

 

-

 

Interest income

 

94

 

 

82

 

 

385

 

 

156

 

Other (expense) income, net

 

(17

)

 

(56

)

 

175

 

 

23

 

Total other income and (expense)

 

(2,833

)

 

(3,212

)

 

(14,329

)

 

(13,250

)

 
Income before income tax expense

 

4,164

 

 

1,673

 

 

7,600

 

 

11,029

 

 
Income tax (expense) benefit

 

(1,537

)

 

39

 

 

(2,765

)

 

(2,041

)

 
Net income

 

2,627

 

 

1,712

 

 

4,835

 

 

8,988

 

 
Less net loss attributable to noncontrolling interest

 

(17

)

 

(8

)

 

(93

)

 

(92

)

 
Net income attributable to Alaska Communications

$

2,644

 

$

1,720

 

$

4,928

 

$

9,080

 

 
Net income per share attributable to Alaska Communications:
Net income applicable to common shares

$

2,644

 

$

1,720

 

$

4,928

 

$

9,080

 

 
Basic and Diluted

$

0.05

 

$

0.03

 

$

0.09

 

$

0.17

 

 
Weighted average shares outstanding:
Basic

 

53,012

 

 

53,185

 

 

53,379

 

 

53,042

 

Diluted

 

53,975

 

 

54,277

 

 

54,277

 

 

53,840

 

Schedule 2
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
 

December 31,

 

December 31,

Assets

2019

 

2018

 
Current assets:
Cash and cash equivalents

$

26,662

 

$

13,351

 

Restricted cash

 

1,631

 

 

1,634

 

Short-term investments

 

134

 

 

134

 

Accounts receivable, net of allowance of $4,627 and $3,936

 

34,354

 

 

31,472

 

Materials and supplies

 

8,900

 

 

6,737

 

Prepayments and other current assets

 

9,617

 

 

12,169

 

Total current assets

 

81,298

 

 

65,497

 

 
Property, plant and equipment

 

1,424,904

 

 

1,390,622

 

Less: accumulated depreciation and amortization

 

(1,042,546

)

 

(1,017,442

)

Property, plant and equipment, net

 

382,358

 

 

373,180

 

 
Deferred income taxes

 

-

 

 

498

 

Operating lease right of use assets

 

80,991

 

 

-

 

Other assets

 

12,598

 

 

16,010

 

Total assets

$

557,245

 

$

455,185

 

 
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term obligations

$

8,906

 

$

2,289

 

Accounts payable, accrued and other current liabilities

 

39,108

 

 

40,957

 

Advance billings and customer deposits

 

3,761

 

 

4,024

 

Operating lease liabilities - current

 

2,795

 

 

-

 

Total current liabilities

 

54,570

 

 

47,270

 

 
Long-term obligations, net of current portion

 

167,476

 

 

168,023

 

Deferred income taxes

 

4,403

 

 

2,315

 

Operating lease liabilities - noncurrent

 

78,767

 

 

-

 

Other long-term liabilities, net of current portion

 

78,520

 

 

67,827

 

Total liabilities

 

383,736

 

 

285,435

 

Commitments and contingencies
Alaska Communications stockholders' equity:
Common stock, $.01 par value; 145,000 authorized

 

541

 

 

533

 

Treasury stock, 1,000 shares at cost

 

(1,812

)

 

-

 

Additional paid in capital

 

161,844

 

 

160,514

 

Retained earnings

 

15,367

 

 

10,439

 

Accumulated other comprehensive loss

 

(3,277

)

 

(2,675

)

Total Alaska Communications stockholders' equity

 

172,663

 

 

168,811

 

Noncontrolling interest

 

846

 

 

939

 

Total stockholders' equity

 

173,509

 

 

169,750

 

 
Total liabilities and stockholders' equity

$

557,245

 

$

455,185

 

Schedule 3

 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands)
 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Cash Flows from Operating Activities:
Net income

$

2,627

 

$

1,712

 

$

4,835

 

$

8,988

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

9,851

 

 

8,572

 

 

37,276

 

 

33,908

 

Loss on disposal of assets, net

 

55

 

 

69

 

 

156

 

 

125

 

Amortization of debt issuance costs and debt discount

 

304

 

 

331

 

 

1,215

 

 

1,353

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

2,830

 

 

-

 

Amortization of deferred capacity revenue

 

(1,255

)

 

(1,101

)

 

(4,655

)

 

(4,098

)

Stock-based compensation

 

814

 

 

548

 

 

1,580

 

 

1,757

 

Deferred income tax expense

 

1,385

 

 

658

 

 

2,919

 

 

2,767

 

Charge for uncollectible accounts

 

(18

)

 

374

 

 

257

 

 

2,745

 

Other non-cash expense, net

 

18

 

 

57

 

 

70

 

 

225

 

Changes in operating assets and liabilities

 

2,414

 

 

(1,904

)

 

12,332

 

 

8,425

 

Net cash provided by operating activities

 

16,195

 

 

9,316

 

 

58,815

 

 

56,195

 

 
Cash Flows from Investing Activities:
Capital expenditures

 

(13,208

)

 

(12,525

)

 

(44,764

)

 

(37,957

)

Capitalized interest

 

(396

)

 

(545

)

 

(1,379

)

 

(2,001

)

Change in unsettled capital expenditures

 

57

 

 

1,584

 

 

640

 

 

(227

)

Proceeds on sale of assets

 

5

 

 

-

 

25

 

 

1

 

Net cash used by investing activities

 

(13,542

)

 

(11,486

)

 

(45,478

)

 

(40,184

)

 
Cash Flows from Financing Activities:
Repayments of long-term debt

 

(1,137

)

 

(1,866

)

 

(174,040

)

 

(31,030

)

Proceeds from the issuance of long-term debt

 

-

 

 

-

 

 

180,000

 

 

14,000

 

Debt issuance costs and discounts

 

-

 

 

-

 

 

(2,683

)

 

-

 

Cash paid for debt extinguishment

 

-

 

 

-

 

 

(1,252

)

 

-

 

Cash proceeds from noncontrolling interest

 

-

 

 

-

 

 

-

 

 

40

 

Payment of withholding taxes on stock-based compensation

 

(5

)

 

(5

)

 

(453

)

 

(415

)

Purchases of treasury stock

 

-

 

 

-

 

 

(1,812

)

 

-

 

Proceeds from issuance of common stock

 

105

 

 

100

 

 

211

 

 

211

 

Net cash used by financing activities

 

(1,037

)

 

(1,771

)

 

(29

)

 

(17,194

)

 
Change in cash, cash equivalents and restricted cash

 

1,616

 

 

(3,941

)

 

13,308

 

 

(1,183

)

 
Cash, cash equivalents and restricted cash, beginning of period

 

26,677

 

 

18,926

 

 

14,985

 

 

16,168

 

 
Cash, cash equivalents and restricted cash, end of period

$

28,293

 

$

14,985

 

$

28,293

 

$

14,985

 

 
Supplemental Cash Flow Data:
Interest paid

$

2,992

 

$

3,531

 

$

12,228

 

$

14,254

 

Income taxes (refunded) paid, net

$

(5,051

)

$

(1

)

$

(5,041

)

$

3

 

Schedule 4
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA
(Unaudited, In Thousands)
 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

 
Net income

$

2,627

 

$

1,712

 

$

4,835

 

$

8,988

 

Add (subtract):
Interest expense

 

2,910

 

 

3,238

 

 

12,059

 

 

13,429

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

2,830

 

 

-

 

Interest income

 

(94

)

 

(82

)

 

(385

)

 

(156

)

Depreciation and amortization

 

9,851

 

 

8,572

 

 

37,276

 

 

33,908

 

Other expense (income), net

 

17

 

 

56

 

 

(175

)

 

(23

)

Loss on disposal of assets, net

 

55

 

 

69

 

 

156

 

 

125

 

Income tax expense (benefit)

 

1,537

 

 

(39

)

 

2,765

 

 

2,041

 

Stock-based compensation

 

814

 

 

548

 

 

1,580

 

 

1,757

 

Cash severance expense

 

120

 

 

-

 

 

1,715

 

 

-

 

Net loss attributable to noncontrolling interest

 

17

 

 

8

 

 

93

 

 

92

 

 
Adjusted EBITDA

$

17,854

 

$

14,082

 

$

62,749

 

$

60,161

 

NonGAAP Measures:

The Company provides certain non-GAAP financial information, including Adjusted EBITDA, Adjusted Free Cash Flow and Net Debt. 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. Adjusted Free Cash Flow is a non-GAAP liquidity measure used by Management to assess the Company’s ability to generate cash and plan for future operating and capital actions. Adjusted EBITDA and Adjusted 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 Company does not provide reconciliations of guidance for Adjusted EBITDA to Net Income, and Adjusted Free Cash Flow to Net Cash Provided by 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 charges and benefits for uncollectible accounts, certain other non-cash expenses, unusual items typically excluded from Adjusted EBITDA and Adjusted Free Cash Flow, and changes in operating assets and liabilities (generally the most significant of these items, representing cash inflows of $12.3 million in the twelve-month period ended December 31, 2019).

Adjusted EBITDA and Adjusted Free Cash Flow are not GAAP measures and should not be considered a substitute for net income, net cash provided by operating activities, or net cash provided or used. Adjusted EBITDA as computed above is not consistent with the definition of Consolidated EBITDA referenced in our 2019 Senior Credit Facility, and other companies may not calculate Non-GAAP measures in the same manner we do.

Adjusted EBITDA is defined as net income before interest expense and income, loss on extinguishment of debt, depreciation and amortization, other income and expense, gain or loss on asset purchases or disposals, provision for income taxes, stock-based compensation, cash severance expense for the Company's former Chief Executive Officer and net loss attributable to noncontrolling interest.

Schedule 5
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW
(Unaudited, In Thousands)
 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

 
Net cash provided by operating activities

$

16,195

 

$

9,316

 

$

58,815

 

$

56,195

 

Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow:
Capital expenditures excluding prefunded projects

 

(9,981

)

 

(12,525

)

 

(41,355

)

 

(37,957

)

Capital expenditures for prefunded projects

 

(3,227

)

 

-

 

 

(3,409

)

 

-

 

Milestone payments received for prefunded projects

 

3,785

 

 

-

 

 

9,070

 

 

1,850

 

Deferred cost of sales for prefunded projects

 

-

 

 

(500

)

 

-

 

 

(500

)

Amortization of revenue for prefunded projects

 

(113

)

 

-

 

 

(113

)

 

-

 

Amortization of deferred capacity revenue

 

1,255

 

 

1,101

 

 

4,655

 

 

4,098

 

Amortization of GCI capacity revenue

 

(522

)

 

(522

)

 

(2,071

)

 

(2,071

)

Amortization of debt issuance costs and debt discount

 

(304

)

 

(331

)

 

(1,215

)

 

(1,353

)

Interest expense

 

2,910

 

 

3,238

 

 

12,059

 

 

13,429

 

Interest paid

 

(2,992

)

 

(3,531

)

 

(12,228

)

 

(14,254

)

Interest income

 

(94

)

 

(82

)

 

(385

)

 

(156

)

Deferred income tax expense

 

(1,385

)

 

(658

)

 

(2,919

)

 

(2,767

)

Income tax expense (benefit)

 

1,537

 

 

(39

)

 

2,765

 

 

2,041

 

Income taxes refunded (paid), net

 

5,051

 

 

1

 

 

5,041

 

 

(3

)

Charge for uncollectible accounts

 

18

 

 

(374

)

 

(257

)

 

(2,745

)

Other expense (income), net

 

17

 

 

56

 

 

(175

)

 

(23

)

Net loss attributable to noncontrolling interest

 

17

 

 

8

 

 

93

 

 

92

 

Other non-cash expense, net

 

(18

)

 

(57

)

 

(70

)

 

(225

)

Changes in operating assets and liabilities

 

(2,414

)

 

1,904

 

 

(12,332

)

 

(8,425

)

Adjusted free cash flow

$

9,735

 

$

(2,995

)

$

15,969

 

$

7,226

 

Schedule 6
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED FREE CASH FLOW
(Unaudited, In Thousands)

 

 

 

 

 

 

 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

 
Adjusted EBITDA

$

17,854

 

$

14,082

 

$

62,749

 

$

60,161

 

 
Less:
Capital expenditures excluding prefunded projects

 

(9,981

)

 

(12,525

)

 

(41,355

)

 

(37,957

)

Amortization of GCI capacity revenue

 

(522

)

 

(522

)

 

(2,071

)

 

(2,071

)

Cash severance expense

 

(120

)

 

-

 

 

(1,715

)

 

-

 

Income taxes refunded (paid), net

 

5,051

 

 

1

 

 

5,041

 

 

(3

)

Interest paid

 

(2,992

)

 

(3,531

)

 

(12,228

)

 

(14,254

)

 

9,290

 

 

(2,495

)

 

10,421

 

 

5,876

 

Impact of prefunded projects:
Capital expenditures for prefunded projects

 

(3,227

)

 

-

 

 

(3,409

)

 

-

 

Milestone payments received for prefunded projects

 

3,785

 

 

-

 

 

9,070

 

 

1,850

 

Deferred cost of sales for prefunded projects

 

-

 

 

(500

)

 

-

 

 

(500

)

Amortization of revenue for prefunded projects

 

(113

)

 

-

 

 

(113

)

 

-

 

 

445

 

 

(500

)

 

5,548

 

 

1,350

 

Adjusted free cash flow*

$

9,735

 

$

(2,995

)

$

15,969

 

$

7,226

 

* Quarterly Adjusted Free Cash Flow fluctuates and should not be viewed as an indicator of annual performance. Onetime events, seasonality of capital spend and the timing of interest payments may result in negative Adjusted Free Cash Flow in one or more quarters.

NonGAAP Measures:

Adjusted Free Cash Flow is a non-GAAP liquidity measure and is defined as Adjusted EBITDA, less recurring operating cash requirements which include capital expenditures, cash income taxes refunded or paid, cash interest paid, amortization of GCI capacity revenue, cash severance expense for the Company's former Chief Executive Officer, and cash receipts and payments, deferred costs and amortized revenue and expense associated with certain prefunded special projects as defined in the 2019 Senior Credit Facility. Amortization of deferred revenue associated with our interconnection agreement with GCI is excluded from Adjusted Free Cash Flow because no cash was received by the Company in connection with this agreement. Amortization of all other deferred revenue, including that associated with other IRU capacity arrangements, is included in Adjusted Free Cash Flow because cash was received by the Company, typically at contract inception, and is being recognized as revenue over the term of the relevant agreement.

See Schedule 3 for Net cash provided by operating activities, Net cash used by investing activities, and Net cash used by financing activities.

See Schedule 5 for the reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow.

Schedule 7
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
REVENUE BY CUSTOMER GROUP
(Unaudited, In Thousands)
 

Three Months Ended

 

Twelve Months Ended

December 31,

 

December 31,

2019

 

2018

 

2019

 

2018

Business and wholesale revenue
Business broadband

$

15,427

 

$

14,898

$

61,785

 

$

60,934

Business voice and other

 

7,218

 

 

7,341

 

28,660

 

 

28,429

Managed IT services

 

1,529

 

 

1,806

 

6,494

 

 

5,742

Equipment sales and installations

 

1,868

 

 

1,257

 

4,698

 

 

5,127

Wholesale broadband

 

11,321

 

 

10,141

 

43,310

 

 

38,362

Wholesale voice and other

 

929

 

 

1,545

 

5,617

 

 

6,000

 
Total business and wholesale revenue

 

38,292

 

 

36,988

 

150,564

 

 

144,594

Growth in business and wholesale

 

3.5

%

 

4.1

%

Consumer revenue
Broadband

 

6,709

 

 

6,418

 

26,589

 

 

26,144

Voice and other

 

2,484

 

 

2,803

 

10,431

 

 

11,158

 
Total consumer revenue

 

9,193

 

 

9,221

 

37,020

 

 

37,302

 
Total business, wholesale, and consumer revenue

 

47,485

 

 

46,209

 

187,584

 

 

181,896

Growth in business, wholesale and consumer revenue

 

2.8

%

 

3.1

%

Growth in broadband revenue

 

6.4

%

 

5.0

%

 
Regulatory revenue
Access

 

5,853

 

 

7,557

 

24,416

 

 

30,878

High cost support

 

4,924

 

 

4,923

 

19,694

 

 

19,694

 
Total regulatory revenue

 

10,777

 

 

12,480

 

44,110

 

 

50,572

 
Total revenue

$

58,262

 

$

58,689

$

231,694

 

$

232,468

Growth in total revenue

 

-0.7

%

 

-0.3

%

Growth Revenues: Business broadband, Managed IT services, Equipment sales and installations, Wholesale broadband, and Consumer broadband
 
Legacy Revenues: Business voice and other, Wholesale voice and other, Consumer voice and other, and Access
 
CAF II Revenues: High Cost Support
Schedule 8
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
 
Three Months Ended

December 31,

 

September 30,

 

December 31,

2019

 

2019

 

2018

 
Voice:
Business access lines

 

67,248

 

 

67,606

 

 

69,382

 

Consumer access lines

 

22,864

 

 

23,565

 

 

25,784

 

 
Voice ARPU business

$

26.95

 

$

27.10

 

$

25.64

 

Voice ARPU consumer

$

33.85

 

$

33.98

 

$

34.04

 

 
Broadband:
Business connections

 

14,789

 

 

14,942

 

 

15,234

 

Consumer connections

 

31,476

 

 

31,466

 

 

32,793

 

 
Broadband ARPU business

$

345.93

 

$

346.97

 

$

324.37

 

Broadband ARPU consumer

$

70.82

 

$

69.87

 

$

65.00

 

 
Monthly Average Churn:
Business voice

 

0.7

%

 

0.7

%

 

1.0

%

Consumer broadband

 

2.9

%

 

3.0

%

 

2.3

%

Consumer voice

 

1.3

%

 

1.4

%

 

1.2

%

Schedule 9

 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
LONG TERM DEBT AND NET DEBT
(Unaudited, In Thousands)
 

December 31,

 

December 31,

2019

 

2018

2019 senior secured credit facility due 2024

$

177,750

 

$

-

 

Debt discount - 2019 senior secured credit facilities due 2024

 

(2,234

)

 

-

 

Debt issuance costs - 2019 senior secured credit facilities due 2024

 

(1,863

)

 

-

 

2017 senior secured credit facility due 2023

 

-

 

 

171,750

 

Debt discount - 2017 senior secured credit facilities due 2023

 

-

 

 

(2,024

)

Debt issuance costs - 2017 senior secured credit facilities due 2023

 

-

 

 

(2,182

)

Capital leases and other long-term obligations

 

2,729

 

 

2,768

 

Total debt

 

176,382

 

 

170,312

 

Less current portion

 

(8,906

)

 

(2,289

)

Long-term obligations, net of current portion

$

167,476

 

$

168,023

 

 
Total debt

$

176,382

 

$

170,312

 

Plus debt discounts and debt issuance costs

 

4,097

 

 

4,206

 

Gross debt

 

180,479

 

 

174,518

 

Cash and cash equivalents

 

(26,662

)

 

(13,351

)

Net debt

$

153,817

 

$

161,167

 

 

Media Contact
Heather Cavanaugh, 907-564-7722
Director, External Affairs and Corporate Communications

Investor Contact
Tiffany Smith, 907-564-7556
Manager, Board and Investor Relations
investors@acsalaska.com

Source: Alaska Communications Systems Group, Inc.