Alaska Communications Reports Second Quarter 2019 Results

August 7, 2019 at 4:05 PM EDT
  • Promoted Bill Bishop to Interim President & CEO to Lead Continued Execution of Strategic Plan
  • Initiated Stock Repurchase Plan
  • Signed Multi-Million Dollar, Pre-Funded Contract in July
  • Meets Company Expectations for Second Quarter Results

ANCHORAGE, Alaska--(BUSINESS WIRE)--Aug. 7, 2019-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the second quarter of 2019.

“Our top priority is to drive growth revenues by leveraging our strengths: stellar customer relationships, excellent customer service, and superior network solutions. For example, in July, an existing carrier customer signed another agreement to pre-fund the further expansion of our fiber network. This strategic program and the associated services are expected to generate significant revenue and secure future growth opportunities. Market demand continues to be robust. Our growth revenues combined with stable high cost support revenues reached 70% of total revenues for the quarter. Also, we initiated our stock repurchase plan providing returns to stockholders. Overall, we have confidence in our business plan based on continued market opportunities, a healthy sales funnel, and efficient use of capital. We look forward to reporting strong progress and profitable growth,” said Bill Bishop, interim president & CEO of Alaska Communications.

Second Quarter 2019 Compared to Second Quarter 2018

  • Total revenue was $57.4 million. This compares to $59.6 million, which included a $2.1 million favorable adjustment to business broadband for the effect of Rural Health Care (RHC) increases approved by the FCC in June 2018. Excluding this adjustment, total revenue was stable year-over-year.
    • Business and wholesale revenue was $37.0 million, compared to $37.5 million, which includes the aforementioned $2.1 million favorable RHC adjustment.
    • Consumer revenue was $9.3 million, compared to $9.5 million.
    • Regulatory revenue was $11.0 million, compared to $12.6 million, as expected due to the restructuring of the Alaska Universal Service program.
  • Operating expenses were $54.2 million, compared to $51.3 million, reflecting the termination in the fourth quarter of 2018 of both the furloughs and temporary wage reductions imposed in the first quarter of 2018, as well as higher depreciation expense.
  • Operating income was $3.2 million, compared to $8.3 million.
  • Net income was $35 thousand, compared to $3.4 million.
  • Capital expenditures were $11.9 million, compared to $8.4 million, reflecting spending in 2019 associated with the 5G wireless backhaul project.
  • Adjusted EBITDA was $13.9 million, compared to $16.9 million. The decline reflects the aforementioned prior year RHC adjustment and labor costs.
  • Adjusted free cash flow was ($3.1) million, compared to $4.2 million, reflecting lower Adjusted EBITDA, unanticipated cash severance expense and planned higher capital spending.
  • Cash was $25.6 million atJune 30, 2019, compared to $15.0 million at December 31, 2018, reflecting net proceeds from the refinancing transaction.
  • Net debt was $158.8 million atJune 30, 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 senior vice-president of finance, said, “The second quarter was in line with our expectations, yet compares unfavorably to the same quarter in 2018 as the result of the $2.1 million RHC program adjustment and a $2.4 million increase in labor costs primarily associated with non-recurring cost savings from employee furloughs and temporary salary reductions. Adjusted Free Cash Flow in the quarter reflects these trends and also includes $1.6 million of unanticipated CEO severance costs. With a strong sales funnel, we expect to deliver revenue, Adjusted EBITDA and Adjusted Free Cash Flow in the second half of 2019 improved over first half, and with that, we reaffirm guidance. Our cash position is very strong, and as announced in June, we initiated a stock repurchase plan to purchase up to one million shares. Through August 6, we have purchased over 500 thousand shares and will continue to evaluate measures to return capital to shareholders.”

2019 Guidance

The Company reaffirms 2019 guidance.

  • Total Revenue to be between $230 million and $235 million
  • Adjusted EBITDA to be between $60 million and $62 million
  • Capital Expenditures to be between $40 million and $42 million
  • Adjusted Free Cash Flow to be between $10 million and $12 million

Conference Call

The Company will host a conference call and live webcast on Thursday, August 8, 2019 at 2:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-800-458-4148 and enter pass code 5014070. All other parties can access the call at 1-323-794-2093 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 September 7, 2019 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 5014070. All other parties can call 1-719-457-0820 and enter pass code 5014070.

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 $7.2 million in the six-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

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

 
Operating revenues

$

57,395

 

$

59,578

 

$

114,304

 

$

115,550

 

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

 

26,356

 

 

26,542

 

 

51,983

 

 

52,375

 

Selling, general & administrative

 

18,718

 

 

16,507

 

 

35,374

 

 

32,519

 

Depreciation and amortization

 

9,200

 

 

8,197

 

 

17,879

 

 

16,984

 

(Gain) loss on disposal of assets, net

 

(95

)

 

44

 

 

(97

)

 

41

 

 
Total operating expenses

 

54,179

 

 

51,290

 

 

105,139

 

 

101,919

 

 
Operating income

 

3,216

 

 

8,288

 

 

9,165

 

 

13,631

 

 
Other income and (expense):
Interest expense

 

(3,096

)

 

(3,401

)

 

(6,152

)

 

(6,905

)

Loss on extinguishment of debt

 

(31

)

 

-

 

 

(2,830

)

 

-

 

Interest income

 

95

 

 

24

 

 

170

 

 

38

 

Other (expense) income, net

 

(122

)

 

(91

)

 

-

 

 

13

 

Total other income and (expense)

 

(3,154

)

 

(3,468

)

 

(8,812

)

 

(6,854

)

 
Income before income tax expense

 

62

 

 

4,820

 

 

353

 

 

6,777

 

 
Income tax expense

 

(46

)

 

(1,418

)

 

(144

)

 

(1,306

)

 
Net income

 

16

 

 

3,402

 

 

209

 

 

5,471

 

 
Less net loss attributable to noncontrolling interest

 

(19

)

 

(40

)

 

(53

)

 

(72

)

 
Net income attributable to Alaska Communications

$

35

 

$

3,442

 

$

262

 

$

5,543

 

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

$

35

 

$

3,442

 

$

262

 

$

5,543

 

 
Basic and Diluted

$

0.00

 

$

0.06

 

$

0.00

 

$

0.10

 

 
Weighted average shares outstanding:
Basic

 

53,799

 

 

53,111

 

 

53,591

 

 

52,897

 

Diluted

 

54,569

 

 

53,888

 

 

54,599

 

 

53,829

 

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

June 30,

 

December 31,

Assets

2019

 

2018

 
Current assets:
Cash and cash equivalents

$

23,920

 

$

13,351

 

Restricted cash

 

1,631

 

 

1,634

 

Short-term investments

 

134

 

 

134

 

Accounts receivable, net of allowance of $4,653 and $3,936

 

22,471

 

 

31,472

 

Materials and supplies

 

7,984

 

 

6,737

 

Prepayments and other current assets

 

10,674

 

 

12,169

 

Total current assets

 

66,814

 

 

65,497

 

 
Property, plant and equipment

 

1,405,566

 

 

1,390,622

 

Less: accumulated depreciation and amortization

 

(1,029,094

)

 

(1,017,442

)

Property, plant and equipment, net

 

376,472

 

 

373,180

 

 
Deferred income taxes

 

432

 

 

498

 

Operating lease right of use assets

 

80,458

 

 

-

 

Other assets

 

15,283

 

 

16,010

 

Total assets

$

539,459

 

$

455,185

 

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

$

4,546

 

$

2,289

 

Accounts payable, accrued and other current liabilities

 

38,187

 

 

40,957

 

Advance billings and customer deposits

 

3,806

 

 

4,024

 

Operating lease liabilities - current

 

2,517

 

 

-

 

Total current liabilities

 

49,056

 

 

47,270

 

 
Long-term obligations, net of current portion

 

173,499

 

 

168,023

 

Deferred income taxes

 

2,348

 

 

2,315

 

Operating lease liabilities - noncurrent

 

77,937

 

 

-

 

Other long-term liabilities, net of current portion

 

66,815

 

 

67,827

 

Total liabilities

 

369,655

 

 

285,435

 

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

 

540

 

 

533

 

Treasury stock, 119 shares at cost

 

(205

)

 

-

 

Additional paid in capital

 

160,654

 

 

160,514

 

Retained earnings

 

10,701

 

 

10,439

 

Accumulated other comprehensive loss

 

(2,772

)

 

(2,675

)

Total Alaska Communications stockholders' equity

 

168,918

 

 

168,811

 

Noncontrolling interest

 

886

 

 

939

 

Total stockholders' equity

 

169,804

 

 

169,750

 

 
Total liabilities and stockholders' equity

$

539,459

 

$

455,185

 

Schedule 3

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

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Cash Flows from Operating Activities:
Net income

$

16

 

$

3,402

 

$

209

 

$

5,471

 

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

 

9,200

 

 

8,197

 

 

17,879

 

 

16,984

 

(Gain) loss on disposal of assets, net

 

(95

)

 

44

 

 

(97

)

 

41

 

Amortization of debt issuance costs and debt discount

 

303

 

 

333

 

 

606

 

 

689

 

Loss on extinguishment of debt

 

31

 

 

-

 

 

2,830

 

 

-

 

Amortization of deferred capacity revenue

 

(1,133

)

 

(983

)

 

(2,259

)

 

(1,930

)

Stock-based compensation

 

(9

)

 

325

 

 

489

 

 

567

 

Income tax expense

 

46

 

 

1,418

 

 

144

 

 

1,306

 

Charge for uncollectible accounts

 

665

 

 

555

 

 

(32

)

 

1,092

 

Amortization of ROU asset

 

583

 

 

-

 

 

1,148

 

 

-

 

Other non-cash expense, net

 

123

 

 

91

 

 

244

 

 

181

 

Income taxes receivable

 

-

 

 

(36

)

 

-

 

 

(36

)

Changes in operating assets and liabilities

 

3,128

 

 

(4,409

)

 

7,172

 

 

(2,007

)

Net cash provided by operating activities

 

12,858

 

 

8,937

 

 

28,333

 

 

22,358

 

 
Cash Flows from Investing Activities:
Capital expenditures

 

(11,869

)

 

(8,401

)

 

(20,432

)

 

(17,081

)

Capitalized interest

 

(254

)

 

(471

)

 

(609

)

 

(891

)

Change in unsettled capital expenditures

 

570

 

 

(360

)

 

(551

)

 

(1,632

)

Proceeds on sale of assets

 

19

 

 

-

 

 

19

 

 

-

 

Net cash used by investing activities

 

(11,534

)

 

(9,232

)

 

(21,573

)

 

(19,604

)

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

 

(10

)

 

(11,699

)

 

(171,768

)

 

(20,506

)

Proceeds from the issuance of long-term debt

 

-

 

 

7,000

 

 

180,000

 

 

14,000

 

Debt issuance costs and discounts

 

(24

)

 

-

 

 

(2,683

)

 

-

 

Cash paid for debt extinguishment

 

(30

)

 

-

 

 

(1,252

)

 

-

 

Cash proceeds from noncontrolling interest

 

-

 

 

-

 

 

-

 

 

40

 

Payment of withholding taxes on stock-based compensation

 

(143

)

 

-

 

 

(448

)

 

(410

)

Purchases of treasury stock

 

(149

)

 

-

 

 

(149

)

 

-

 

Proceeds from issuance of common stock

 

106

 

 

111

 

 

106

 

 

111

 

Net cash (used) provided by financing activities

 

(250

)

 

(4,588

)

 

3,806

 

 

(6,765

)

 
Change in cash, cash equivalents and restricted cash

 

1,074

 

 

(4,883

)

 

10,566

 

 

(4,011

)

 
Cash, cash equivalents and restricted cash, beginning of period

 

24,477

 

 

17,040

 

 

14,985

 

 

16,168

 

 
Cash, cash equivalents and restricted cash, end of period

$

25,551

 

$

12,157

 

$

25,551

 

$

12,157

 

 
Supplemental Cash Flow Data:
Interest paid

$

3,039

 

$

3,810

 

$

6,114

 

$

7,251

 

Income taxes paid, net

$

-

 

$

4

 

$

10

 

$

4

 

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

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

 
Net income

$

16

 

$

3,402

 

$

209

 

$

5,471

 

Add (subtract):
Interest expense

 

3,096

 

 

3,401

 

 

6,152

 

 

6,905

 

Loss on extinguishment of debt

 

31

 

 

-

 

 

2,830

 

 

-

 

Interest income

 

(95

)

 

(24

)

 

(170

)

 

(38

)

Depreciation and amortization

 

9,200

 

 

8,197

 

 

17,879

 

 

16,984

 

Other expense (income), net

 

122

 

 

91

 

 

-

 

 

(13

)

(Gain) loss on disposal of assets, net

 

(95

)

 

44

 

 

(97

)

 

41

 

Income tax expense

 

46

 

 

1,418

 

 

144

 

 

1,306

 

Stock-based compensation

 

(9

)

 

325

 

 

489

 

 

567

 

Cash severance expense

 

1,595

 

 

-

 

 

1,595

 

 

-

 

Net loss attributable to noncontrolling interest

 

19

 

 

40

 

 

53

 

 

72

 

 
Adjusted EBITDA

$

13,926

 

$

16,894

 

$

29,084

 

$

31,295

 

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 $7.2 million in the six-month period ended June 30, 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 (loss) 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

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

 
Net cash provided by operating activities

$

12,858

 

$

8,937

 

$

28,333

 

$

22,358

 

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

 

(11,869

)

 

(8,401

)

 

(20,432

)

 

(17,081

)

Amortization of deferred capacity revenue

 

1,133

 

 

983

 

 

2,259

 

 

1,930

 

Amortization of GCI capacity revenue

 

(516

)

 

(516

)

 

(1,027

)

 

(1,027

)

Amortization of debt issuance costs and debt discount

 

(303

)

 

(333

)

 

(606

)

 

(689

)

Interest expense

 

3,096

 

 

3,401

 

 

6,152

 

 

6,905

 

Interest paid

 

(3,039

)

 

(3,810

)

 

(6,114

)

 

(7,251

)

Interest income

 

(95

)

 

(24

)

 

(170

)

 

(38

)

Income taxes receivable

 

-

 

 

36

 

 

-

 

 

36

 

Income taxes paid, net

 

-

 

 

(4

)

 

(10

)

 

(4

)

Charge for uncollectible accounts

 

(665

)

 

(555

)

 

32

 

 

(1,092

)

Amortization of ROU asset

 

(583

)

 

-

 

 

(1,148

)

 

-

 

Other expense (income), net

 

122

 

 

91

 

 

-

 

 

(13

)

Net loss attributable to noncontrolling interest

 

19

 

 

40

 

 

53

 

 

72

 

Other non-cash expense, net

 

(123

)

 

(91

)

 

(244

)

 

(181

)

Changes in operating assets and liabilities

 

(3,128

)

 

4,409

 

 

(7,172

)

 

2,007

 

Adjusted free cash flow

$

(3,093

)

$

4,163

 

$

(94

)

$

5,932

 

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

Three Months Ended

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

 
Adjusted EBITDA

$

13,926

 

$

16,894

 

$

29,084

 

$

31,295

 

 
Less:
Capital expenditures

 

(11,869

)

 

(8,401

)

 

(20,432

)

 

(17,081

)

Amortization of GCI capacity revenue

 

(516

)

 

(516

)

 

(1,027

)

 

(1,027

)

Cash severance expense

 

(1,595

)

 

-

 

 

(1,595

)

 

-

 

Income taxes paid, net

 

-

 

 

(4

)

 

(10

)

 

(4

)

Interest paid

 

(3,039

)

 

(3,810

)

 

(6,114

)

 

(7,251

)

Adjusted free cash flow*

$

(3,093

)

$

4,163

 

$

(94

)

$

5,932

 

* 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, and cash severance expense for the Company's former Chief Executive Officer. 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) provided 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

 

Six Months Ended

June 30,

 

June 30,

2019

 

2018

 

2019

 

2018

Business and wholesale revenue
Business broadband

$

15,437

 

$

17,009

$

30,704

 

$

30,668

Business voice and other

 

7,241

 

 

7,038

 

14,242

 

 

13,889

Managed IT services

 

1,517

 

 

1,191

 

3,176

 

 

2,456

Equipment sales and installations

 

1,008

 

 

1,460

 

1,888

 

 

2,382

Wholesale broadband

 

10,443

 

 

9,338

 

20,705

 

 

18,916

Wholesale voice and other

 

1,392

 

 

1,442

 

2,818

 

 

2,930

 
Total business and wholesale revenue

 

37,038

 

 

37,478

 

73,533

 

 

71,241

Growth in business and wholesale

 

-1.2

%

 

3.2

%

Consumer revenue
Broadband

 

6,694

 

 

6,695

 

13,162

 

 

13,187

Voice and other

 

2,647

 

 

2,759

 

5,380

 

 

5,636

 
Total consumer revenue

 

9,341

 

 

9,454

 

18,542

 

 

18,823

 
Total business, wholesale, and consumer revenue

 

46,379

 

 

46,932

 

92,075

 

 

90,064

Growth in business, wholesale and consumer revenue

 

-1.2

%

 

2.2

%

Growth in broadband revenue

 

-1.4

%

 

2.9

%

 
Regulatory revenue
Access

 

6,093

 

 

7,722

 

12,382

 

 

15,639

High cost support

 

4,923

 

 

4,924

 

9,847

 

 

9,847

 
Total regulatory revenue

 

11,016

 

 

12,646

 

22,229

 

 

25,486

 
Total revenue

$

57,395

 

$

59,578

$

114,304

 

$

115,550

Growth in total revenue

 

-3.7

%

 

-1.1

%

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

June 30,

 

March 31,

 

June 30,

2019

 

2019

 

2018

 
Voice:
Business access lines

 

67,984

 

 

68,788

 

 

70,494

 

Consumer access lines

 

24,337

 

 

25,156

 

 

27,411

 

 
Voice ARPU business

$

27.03

 

$

25.21

 

$

25.38

 

Voice ARPU consumer

$

33.94

 

$

33.77

 

$

31.43

 

 
Broadband:
Business connections

 

15,050

 

 

15,126

 

 

15,368

 

Consumer connections

 

32,401

 

 

32,840

 

 

33,432

 

 
Broadband ARPU business

$

340.77

 

$

334.94

 

$

369.46

 

Broadband ARPU consumer

$

68.17

 

$

65.39

 

$

66.23

 

 
Monthly Average Churn:
Business voice

 

1.0

%

 

1.1

%

 

1.0

%

Consumer broadband

 

2.8

%

 

2.2

%

 

2.5

%

Consumer voice

 

1.5

%

 

1.1

%

 

1.4

%

Schedule 9

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

June 30,

 

December 31,

2019

 

2018

2019 senior secured credit facility due 2024

$

180,000

 

$

-

 

Debt discount - 2019 senior secured credit facilities due 2024

 

(2,585

)

 

-

 

Debt issuance costs - 2019 senior secured credit facilities due 2024

 

(2,121

)

 

-

 

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

 

2,751

 

 

2,768

 

Total debt

 

178,045

 

 

170,312

 

Less current portion

 

(4,546

)

 

(2,289

)

Long-term obligations, net of current portion

$

173,499

 

$

168,023

 

 
Total debt

$

178,045

 

$

170,312

 

Plus debt discounts and debt issuance costs

 

4,706

 

 

4,206

 

Gross debt

 

182,751

 

 

174,518

 

Cash and cash equivalents

 

(23,920

)

 

(13,351

)

Net debt

$

158,831

 

$

161,167

 

 

Source: Alaska Communications Systems Group, Inc.

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