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Nov 17, 2020
Network Upgrades Bring Five Times More Capacity to Alaska Communications’ Subsea Fiber


ANCHORAGE, Alaska--(BUSINESS WIRE)--Nov. 17, 2020-- Alaska Communications (NASDAQ: ALSK) has completed major network upgrades to its subsea Northstar fiber line, increasing capacity by more than five times.

“Despite the pandemic, our engineers and network teams have been working diligently to expand and improve our network to bring high-speed broadband and IT services to customers,” said Diedre Williams, senior vice president, operations.

Network improvements to Northstar were completed last month. Upgrades to AKORN, the company’s other subsea fiber line, were completed about a year and half ago. Upgrades to both cables create an additional 5.8Tbps of capacity. This means more capacity for critical services like telehealth and distance learning, along with support for economic development and quality of life.

“We continue to strengthen our fiber infrastructure, especially at a time when access to broadband is so critical,” said Williams. “These network improvements demonstrate our commitment to providing our customers with the advanced services they need to access work, education, healthcare and more.”

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.

Media Contact:
Heather Marron, 907-564-1326
Manager, Corporate Communications

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

Source: Alaska Communications

Nov 04, 2020
Alaska Communications Reports Third Quarter 2020 Results


  • Grew total revenue 2.3% year over year
    • 6.7% business and wholesale broadband growth driven by fiber network
    • 27.4% in equipment sales and managed IT
  • Reported net income attributable to Alaska Communications of $2.3 million and Adjusted EBITDA of $16.6 million 
  • Increased 2020 full year guidance for Adjusted Free Cash Flow to $14 million to $16 million, expect to meet or exceed guidance for Total Revenue and Adjusted EBITDA
  • Upgraded Northstar subsea fiber, increasing capacity from 240Gbps to 1.3Tbps
  • Won Citizens Broadband Radio Service (CBRS) Spectrum across 135 cities covering over 390k square miles in Alaska in FCC auction in support of broadband strategy
  • Subsequent to quarter end, signed merger agreement to be acquired by Macquarie Capital and GCM Grosvenor

ANCHORAGE, Alaska--(BUSINESS WIRE)--Nov. 4, 2020-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the third quarter of 2020.

“Our results for the third quarter reflect execution of our strategic initiatives to deliver industry-leading telecommunications products and services. Prioritizing superior customer service and fiber-based network solutions, we have established Alaska Communications as a premier provider. We continue to strengthen our fiber infrastructure, to facilitate our multiyear transition to IP-based services, and to evaluate means to increase our access and core network. This includes optical transport network upgrades to our subsea Northstar fiber resulting in a capacity increase of over five times, as well as securing CBRS spectrum in 135 cities ranging from southeast Alaska to the North Slope. Our biggest strengths in 2020 have been to manage the unexpected, quickly offer customers solutions, and continue to drive ahead adding many route miles of fiber. In addition to benefiting our customers, we are creating opportunities.

“Also, after years in development, in October, we went live with our new business and operating systems that will enhance the customer experience through streamlined ordering process; improve business analytics and reporting; and simplify operations that we expect to yield expense savings and drive operational excellence in coming years. We are committed to connecting the people and businesses of Alaska and beyond, investing in our future and driving growth to benefit our constituents. We are very excited about the future,” said Bill Bishop, president & CEO.

Three Months Ended September 30, 2020 Compared to 2019

  • Total revenue was $60.5 million, compared to $59.1 million, an increase of 2.3%.
    • Business and wholesale revenue was $40.9 million, compared to $38.7 million, up 5.6%.
    • Consumer revenue was steady at $9.3 million for both periods.
    • Regulatory revenue was $10.3 million, compared to $11.1 million, a decrease of 7.0%.
  • Operating expenses were $54.7 million, compared to $53.4 million.
  • Operating income was $5.8 million for both periods.
  • Net income attributable to Alaska Communications was $2.3 million, compared to $2.0 million.
  • Capital expenditures were $14.5 million, compared to $11.1 million, or excluding prefunded projects $11.7 million, compared to $10.9 million.
  • Adjusted EBITDA was $16.6 million, compared to $15.8 million.
  • Adjusted Free Cash Outflow was $7.3 million, compared with Adjusted Free Cash Flow of $6.3 million, or excluding prefunded projects Adjusted Free Cash Flow was $1.7 million, compared to $1.2 million.

Balance Sheet Highlights

  • Cash was $33.8 million at September 30, 2020, compared to $28.3 million at December 31, 2019.
  • Net debt was $141.6 million at September 30, 2020, compared to $153.8 million at December 31, 2019.

Nine Months Ended September 30, 2020 Compared to 2019

  • Total revenue was $178.2 million, compared to $173.4 million, an increase of 2.8%.
    • Business and wholesale revenue was $119.7 million, compared to $112.3 million, up 6.6%.
    • Consumer revenue was $27.6 million, compared to $27.8 million, a decrease of 0.8%.
    • Regulatory revenue was $30.9 million, compared to $33.3 million, a decrease of 7.2%.
  • Operating expenses were $160.5 million, compared to $158.5 million.
  • Operating income was $17.7 million, compared to $14.9 million.
  • Net income attributable to Alaska Communications was $7.1 million, compared to $2.3 million.
  • Capital expenditures were $32.9 million, compared to $31.6 million, or excluding prefunded projects $26.3 million, compared to $31.4 million.
  • Adjusted EBITDA was $49.2 million, compared to $44.9 million.
  • Adjusted Free Cash Flow was $11.4 million, compared with $6.2 million, or excluding prefunded projects was $12.9 million, compared to $1.1 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.

“We continue to grow total revenue, increasing 2.3% for the quarter, year over year. Business and Wholesale revenue grew 5.6%, compared to 2019, and we expanded our Adjusted EBITDA margin to 27.5% in third quarter 2020, up from 26.7% in third quarter 2019. As the new work environment has altered business requirements, customers are both modifying and accelerating their network plans. During the quarter, demand for equipment and managed IT services increased, which led to a net 27.4% increase in revenue, compared to the same period last year. Our results this quarter reflect our strategic plan for growth, and we expect to be at the high end of our guidance for 2020,” said Laurie Butcher, Chief Financial Officer.

2020 Guidance

For full year 2020 guidance, management

  • Reaffirms Total Revenue to be between $232 million and $237 million;
  • Reaffirms Adjusted EBITDA to be between $63 million and $65 million;
  • Adjusts Capital Expenditures excluding prefunded projects to be between $37 million and $39 million; and
  • Increases Adjusted Free Cash Flow excluding prefunded projects to be between $14 million and $16 million.

Subsequent Events

On November 3, 2020, Alaska Communications, together with Macquarie Capital and GCM announced a merger agreement through which a Macquarie Capital and GCM, through its Labor Impact Fund, will acquire all outstanding shares of Alaska Communications for $3.00 per share in a cash transaction valued at approximately $300 million, including debt, subject to shareholder and regulatory approval. Additional information can be found in documents filed with the SEC posted at www.sec.gov or alsk.com.

Conference Call

The Company will host a conference call and live webcast on Thursday, November 5, 2020 at 2:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-800-430-8332 and enter code 1313142. All other parties can access the call at 1-323-289-6581 using the same code.

The live webcast of the conference call will be accessible from the "Events Calendar" section of the company's investor website (www.alsk.com). The webcast will be archived for 30 days. A replay of the conference call will also be available two hours after the call ends and will run until December 5, 2020 at 5 p.m. ET. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter code 1313142. All other parties can call 1-719-457-0820 and enter code 1313142.

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.

Revenue Category Definitions

Growth Revenues are defined as business broadband, managed IT services, equipment sales and installations, wholesale broadband and consumer broadband. Legacy Revenues are defined as business voice and other, Wholesale voice and other, consumer voice and other, and Access. CAF II Revenues are defined as high cost support.

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 $12.4 million in the nine-month period of 2020).

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in connection with the proposed acquisition of the Company by Macquarie Capital and GCM Grosvenor, whereby the Company will become a wholly owned subsidiary of an affiliate of Macquarie Capital and GCM Grosvenor (the “proposed merger”). The proposed merger will be submitted to the Company’s stockholders for their consideration at a special meeting of the stockholders. In connection therewith, the Company intends to file relevant materials with the United States Securities and Exchange Commission (SEC), including a proxy statement on Schedule 14A, which will be mailed or otherwise disseminated to the Company’s stockholders. STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Stockholders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company or the proposed merger, once such documents are filed with the SEC, free of charge at the SEC's website at www.sec.gov, or from Alaska Communications at www.alsk.com or by directing a request to the Company’s Investor Relations Department at investors@acsalaska.com.

Participants in the Solicitation

The Company and certain of its directors and executive officers and other members of management and employees may be deemed to be "participants" in the solicitation of proxies from the Company’s stockholders in connection with the proposed merger. Information about the Company's directors and executive officers and their direct or indirect interests, by security holdings or otherwise, is set forth in the Company’s proxy statement on Schedule 14A for its 2020 annual meeting of stockholders filed with the SEC on April 29, 2020. To the extent holdings of the Company’s securities by such participants (or the identity of such participants) have changed, such information has been or will be reflected on Statements of Change in Ownership on Forms 3 and 4 subsequently filed with the SEC. Additional information regarding the participants in the proxy solicitation and a description of their direct or indirect interests, by security holdings or otherwise, will be included in the definitive proxy statement and may be included in relevant documents filed with the SEC regarding the proposed merger, if and when they become available. Free copies of these materials may be obtained as described in the preceding paragraph.

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 impacts of the COVID-19 pandemic on the economy of Alaska and on the Company, 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 North Slope 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

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

 
 
Operating revenues

$

60,514

 

$

59,128

 

$

178,236

 

$

173,432

 

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

 

27,879

 

 

26,785

 

 

82,127

 

 

78,768

 

Selling, general & administrative

 

16,544

 

 

16,832

 

 

48,163

 

 

52,206

 

Depreciation and amortization

 

10,234

 

 

9,546

 

 

30,107

 

 

27,425

 

Loss on disposal of assets, net

 

23

 

 

198

 

 

123

 

 

101

 

 
Total operating expenses

 

54,680

 

 

53,361

 

 

160,520

 

 

158,500

 

 
Operating income

 

5,834

 

 

5,767

 

 

17,716

 

 

14,932

 

 
Other income and (expense):
Interest expense

 

(2,659

)

 

(2,997

)

 

(8,357

)

 

(9,149

)

Loss on extinguishment of debt

 

-

 

 

-

 

 

-

 

 

(2,830

)

Interest income

 

13

 

 

121

 

 

156

 

 

291

 

Other income, net

 

33

 

 

192

 

 

447

 

 

192

 

Total other income and (expense)

 

(2,613

)

 

(2,684

)

 

(7,754

)

 

(11,496

)

 
Income before income tax expense

 

3,221

 

 

3,083

 

 

9,962

 

 

3,436

 

 
Income tax expense

 

(941

)

 

(1,084

)

 

(2,897

)

 

(1,228

)

 
Net income

 

2,280

 

 

1,999

 

 

7,065

 

 

2,208

 

 
Less net loss attributable to noncontrolling interest

 

(22

)

 

(23

)

 

(64

)

 

(76

)

 
Net income attributable to Alaska Communications

$

2,302

 

$

2,022

 

$

7,129

 

$

2,284

 

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

$

2,302

 

$

2,022

 

$

7,129

 

$

2,284

 

 
Basic and Diluted

$

0.04

 

$

0.04

 

$

0.13

 

$

0.04

 

 
Weighted average shares outstanding:
Basic

 

54,116

 

 

53,328

 

 

53,906

 

 

53,503

 

Diluted

 

54,572

 

 

53,991

 

 

54,393

 

 

54,405

 

Schedule 2

 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
 
September 30, December 31,
Assets

2020

2019

 
Current assets:
Cash and cash equivalents

$

32,215

 

$

26,662

 

Restricted cash

 

1,628

 

 

1,631

 

Short-term investments

 

134

 

 

134

 

Accounts receivable, net of allowance of $3,415 and $4,627

 

35,204

 

 

34,354

 

Materials and supplies

 

8,090

 

 

8,900

 

Prepayments and other current assets

 

11,932

 

 

9,617

 

Total current assets

 

89,203

 

 

81,298

 

 
Property, plant and equipment

 

1,448,502

 

 

1,424,904

 

Less: accumulated depreciation and amortization

 

(1,062,736

)

 

(1,042,546

)

Property, plant and equipment, net

 

385,766

 

 

382,358

 

 
Operating lease right of use assets

 

89,517

 

 

80,991

 

Other assets

 

11,531

 

 

12,598

 

Total assets

$

576,017

 

$

557,245

 

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

$

9,063

 

$

8,906

 

Accounts payable, accrued and other current liabilities

 

45,029

 

 

39,108

 

Advance billings and customer deposits

 

3,520

 

 

3,761

 

Operating lease liabilities - current

 

3,189

 

 

2,795

 

Total current liabilities

 

60,801

 

 

54,570

 

 
Long-term obligations, net of current portion

 

161,620

 

 

167,476

 

Deferred income taxes

 

6,495

 

 

4,403

 

Operating lease liabilities - noncurrent

 

80,498

 

 

78,767

 

Other long-term liabilities, net of current portion

 

91,991

 

 

78,520

 

Total liabilities

 

401,405

 

 

383,736

 

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

 

548

 

 

541

 

Treasury stock, 1,000 shares at cost

 

(1,812

)

 

(1,812

)

Additional paid in capital

 

162,740

 

 

161,844

 

Retained earnings

 

17,644

 

 

15,367

 

Accumulated other comprehensive loss

 

(5,290

)

 

(3,277

)

Total Alaska Communications stockholders' equity

 

173,830

 

 

172,663

 

Noncontrolling interest

 

782

 

 

846

 

Total stockholders' equity

 

174,612

 

 

173,509

 

 
Total liabilities and stockholders' equity

$

576,017

 

$

557,245

 

Schedule 3

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

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

Cash Flows from Operating Activities:
Net income

$

2,280

 

$

1,999

 

$

7,065

 

$

2,208

 

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

 

10,234

 

 

9,546

 

 

30,107

 

 

27,425

 

Loss on disposal of assets, net

 

23

 

 

198

 

 

123

 

 

101

 

Amortization of debt issuance costs and debt discount

 

298

 

 

305

 

 

942

 

 

911

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

-

 

 

2,830

 

Amortization of deferred capacity revenue

 

(1,810

)

 

(1,141

)

 

(4,881

)

 

(3,400

)

Stock-based compensation

 

500

 

 

277

 

 

1,218

 

 

766

 

Deferred income tax expense

 

940

 

 

1,396

 

 

2,890

 

 

1,534

 

Charge for uncollectible accounts

 

(561

)

 

307

 

 

(955

)

 

275

 

Amortization of ROU assets

 

815

 

 

568

 

 

2,072

 

 

1,716

 

Other non-cash (income) expense, net

 

(33

)

 

(192

)

 

(99

)

 

52

 

Changes in operating assets and liabilities

 

(8,772

)

 

1,024

 

 

12,404

 

 

8,202

 

Net cash provided by operating activities

 

3,914

 

 

14,287

 

 

50,886

 

 

42,620

 

 
Cash Flows from Investing Activities:
Capital expenditures

 

(14,528

)

 

(11,124

)

 

(32,940

)

 

(31,556

)

Capitalized interest

 

(375

)

 

(374

)

 

(1,006

)

 

(983

)

Change in unsettled capital expenditures

 

1,104

 

 

1,134

 

 

402

 

 

583

 

Proceeds on sale of assets

 

-

 

 

1

 

 

-

 

 

20

 

Net cash used by investing activities

 

(13,799

)

 

(10,363

)

 

(33,544

)

 

(31,936

)

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

 

(2,263

)

 

(1,135

)

 

(6,641

)

 

(172,903

)

Proceeds from the issuance of long-term debt

 

-

 

 

-

 

 

-

 

 

180,000

 

Debt issuance costs and discounts

 

-

 

 

-

 

 

-

 

 

(2,683

)

Cash paid for debt extinguishment

 

-

 

 

-

 

 

-

 

 

(1,252

)

Payment of cash dividend on common stock

 

(16

)

 

-

 

 

(4,836

)

 

-

 

Payment of withholding taxes on stock-based compensation

 

-

 

 

-

 

 

(439

)

 

(448

)

Purchases of treasury stock

 

-

 

 

(1,663

)

 

-

 

 

(1,812

)

Proceeds from issuance of common stock

 

-

 

 

-

 

 

124

 

 

106

 

Net cash (used) provided by financing activities

 

(2,279

)

 

(2,798

)

 

(11,792

)

 

1,008

 

 
Change in cash, cash equivalents and restricted cash

 

(12,164

)

 

1,126

 

 

5,550

 

 

11,692

 

 
Cash, cash equivalents and restricted cash, beginning of period

 

46,007

 

 

25,551

 

 

28,293

 

 

14,985

 

 
Cash, cash equivalents and restricted cash, end of period

$

33,843

 

$

26,677

 

$

33,843

 

$

26,677

 

 
Supplemental Cash Flow Data:
Interest paid

$

2,724

 

$

3,122

 

$

8,432

 

$

9,236

 

Dividends payable at September 30, 2020

$

16

 

$

-

 

$

16

 

$

-

 

Income taxes paid, net

$

4

 

$

-

 

$

4

 

$

10

 

Schedule 4

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

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

 
Net income

$

2,280

 

$

1,999

 

$

7,065

 

$

2,208

 

Add (subtract):
Interest expense

 

2,659

 

 

2,997

 

 

8,357

 

 

9,149

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

-

 

 

2,830

 

Interest income

 

(13

)

 

(121

)

 

(156

)

 

(291

)

Depreciation and amortization

 

10,234

 

 

9,546

 

 

30,107

 

 

27,425

 

Other income, net

 

(33

)

 

(192

)

 

(447

)

 

(192

)

Loss on disposal of assets, net

 

23

 

 

198

 

 

123

 

 

101

 

Income tax expense

 

941

 

 

1,084

 

 

2,897

 

 

1,228

 

Stock-based compensation

 

500

 

 

277

 

 

1,218

 

 

766

 

Cash severance expense

 

-

 

 

-

 

 

-

 

 

1,595

 

Net loss attributable to noncontrolling interest

 

22

 

 

23

 

 

64

 

 

76

 

 
Adjusted EBITDA

$

16,613

 

$

15,811

 

$

49,228

 

$

44,895

 

 
Non-GAAP 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 $12.4 million in the nine-month period ended September 30, 2020).
 
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, 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

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

 
Net cash provided by operating activities

$

3,914

 

$

14,287

 

$

50,886

 

$

42,620

 

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

 

(11,682

)

 

(10,942

)

 

(26,345

)

 

(31,374

)

Capital expenditures for prefunded projects

 

(2,846

)

 

(182

)

 

(6,595

)

 

(182

)

Milestone payments received for prefunded projects

 

2,500

 

 

5,285

 

 

14,280

 

 

5,285

 

Milestone payments made for prefunded projects

 

(8,250

)

 

-

 

 

(8,250

)

 

-

 

Deferred cost of sales for prefunded projects

 

175

 

 

-

 

 

350

 

 

-

 

Amortization of revenue for prefunded projects

 

(521

)

 

-

 

 

(1,230

)

 

-

 

Amortization of deferred capacity revenue

 

1,810

 

 

1,141

 

 

4,881

 

 

3,400

 

Amortization of GCI capacity revenue

 

(522

)

 

(522

)

 

(1,554

)

 

(1,549

)

Amortization of debt issuance costs and debt discount

 

(298

)

 

(305

)

 

(942

)

 

(911

)

Interest expense

 

2,659

 

 

2,997

 

 

8,357

 

 

9,149

 

Interest paid

 

(2,724

)

 

(3,122

)

 

(8,432

)

 

(9,236

)

Interest income

 

(13

)

 

(121

)

 

(156

)

 

(291

)

Deferred income tax expense

 

(940

)

 

(1,396

)

 

(2,890

)

 

(1,534

)

Income tax expense

 

941

 

 

1,084

 

 

2,897

 

 

1,228

 

Income taxes paid, net

 

(4

)

 

-

 

 

(4

)

 

(10

)

Charge for uncollectible accounts

 

561

 

 

(307

)

 

955

 

 

(275

)

Amortization of ROU assets

 

(815

)

 

(568

)

 

(2,072

)

 

(1,716

)

Other income, net

 

(33

)

 

(192

)

 

(447

)

 

(192

)

Net loss attributable to noncontrolling interest

 

22

 

 

23

 

 

64

 

 

76

 

Other non-cash income (expense), net

 

33

 

 

192

 

 

99

 

 

(52

)

Changes in operating assets and liabilities

 

8,772

 

 

(1,024

)

 

(12,404

)

 

(8,202

)

Adjusted free cash flow

$

(7,261

)

$

6,328

 

$

11,448

 

$

6,234

 

Schedule 6

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

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

 
Adjusted EBITDA

$

16,613

 

$

15,811

 

$

49,228

 

$

44,895

 

 
Less:
Capital expenditures excluding prefunded projects

 

(11,682

)

 

(10,942

)

 

(26,345

)

 

(31,374

)

Amortization of GCI capacity revenue

 

(522

)

 

(522

)

 

(1,554

)

 

(1,549

)

Cash severance expense

 

-

 

 

-

 

 

-

 

 

(1,595

)

Income taxes paid, net

 

(4

)

 

-

 

 

(4

)

 

(10

)

Interest paid

 

(2,724

)

 

(3,122

)

 

(8,432

)

 

(9,236

)

 

1,681

 

 

1,225

 

 

12,893

 

 

1,131

 

Impact of prefunded projects:
Capital expenditures for prefunded projects

 

(2,846

)

 

(182

)

 

(6,595

)

 

(182

)

Milestone payments received for prefunded projects

 

2,500

 

 

5,285

 

 

14,280

 

 

5,285

 

Milestone payments made for prefunded projects

 

(8,250

)

 

-

 

 

(8,250

)

 

-

 

Deferred cost of sales for prefunded projects

 

175

 

 

-

 

 

350

 

 

-

 

Amortization of revenue for prefunded projects

 

(521

)

 

-

 

 

(1,230

)

 

-

 

 

(8,942

)

 

5,103

 

 

(1,445

)

 

5,103

 

Adjusted free cash flow*

$

(7,261

)

$

6,328

 

$

11,448

 

$

6,234

 

 
* 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.
 
Non-GAAP 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) 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

 

Nine Months Ended

September 30,

 

September 30,

2020

 

2019

 

2020

 

2019

Business and wholesale revenue
Business broadband

$

16,053

 

$

15,654

$

47,950

 

$

46,358

Business voice and other

 

7,331

 

 

7,200

 

21,747

 

 

21,442

Managed IT services

 

1,377

 

 

1,789

 

3,904

 

 

4,965

Equipment sales and installations

 

2,102

 

 

942

 

4,708

 

 

2,830

Wholesale broadband

 

12,693

 

 

11,284

 

37,422

 

 

31,989

Wholesale voice and other

 

1,342

 

 

1,870

 

3,974

 

 

4,688

 
Total business and wholesale revenue

 

40,898

 

 

38,739

 

119,705

 

 

112,272

Growth in business and wholesale

 

5.6

%

 

6.6

%

Consumer revenue
Broadband

 

6,986

 

 

6,718

 

20,474

 

 

19,880

Voice and other

 

2,305

 

 

2,567

 

7,134

 

 

7,947

 
Total consumer revenue

 

9,291

 

 

9,285

 

27,608

 

 

27,827

 
Total business, wholesale, and consumer revenue

 

50,189

 

 

48,024

 

147,313

 

 

140,099

Growth in business, wholesale and consumer revenue

 

4.5

%

 

5.1

%

Growth in broadband revenue

 

6.2

%

 

7.8

%

 
Regulatory revenue
Access

 

5,402

 

 

6,181

 

16,153

 

 

18,563

High cost support

 

4,923

 

 

4,923

 

14,770

 

 

14,770

 
Total regulatory revenue

 

10,325

 

 

11,104

 

30,923

 

 

33,333

 
Total revenue

$

60,514

 

$

59,128

$

178,236

 

$

173,432

Growth in total revenue

 

2.3

%

 

2.8

%

 
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
September 30, June 30, September 30,

2020

2020

2019

 
Voice:
Business access lines

 

66,253

 

 

66,939

 

 

68,600

 

Consumer access lines

 

21,229

 

 

21,769

 

 

23,530

 

 
Voice ARPU business

$

27.98

 

$

27.68

 

$

26.71

 

Voice ARPU consumer

$

34.13

 

$

34.35

 

$

34.03

 

 
Broadband:
Business connections

 

14,669

 

 

14,661

 

 

15,033

 

Consumer connections

 

32,012

 

 

32,115

 

 

31,623

 

 
Broadband ARPU business

$

364.09

 

$

369.14

 

$

344.88

 

Broadband ARPU consumer

$

72.41

 

$

70.69

 

$

69.86

 

 
Monthly Average Churn:
Business voice

 

0.9

%

 

0.8

%

 

0.7

%

Consumer broadband

 

3.0

%

 

2.6

%

 

3.0

%

Consumer voice

 

1.1

%

 

1.0

%

 

1.4

%

Schedule 9

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

September 30,

 

December 31,

 

2020

 

2019

2019 senior secured credit facility due 2024  

$

171,146

 

 

$

177,750

 

Debt discount - 2019 senior secured credit facilities due 2024  

 

(1,690

)

 

 

(2,234

)

Debt issuance costs - 2019 senior secured credit facilities due 2024  

 

(1,464

)

 

 

(1,863

)

Capital leases and other long-term obligations  

 

2,691

 

 

 

2,729

 

Total debt  

 

170,683

 

 

 

176,382

 

Less current portion  

 

(9,063

)

 

 

(8,906

)

Long-term obligations, net of current portion  

$

161,620

 

 

$

167,476

 

     
Total debt  

$

170,683

 

 

$

176,382

 

Plus debt discounts and debt issuance costs  

 

3,154

 

 

 

4,097

 

Gross debt  

 

173,837

 

 

 

180,479

 

Cash and cash equivalents  

 

(32,215

)

 

 

(26,662

)

Net debt  

$

141,622

 

 

$

153,817

 

 

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

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

Source: Alaska Communications Systems Group, Inc.

Nov 03, 2020
Alaska Communications Announces Definitive Agreement to Be Acquired by Macquarie Capital and GCM Grosvenor in $300 Million Transaction


-Conference Call on November 5th to Discuss the Transaction and the Third Quarter 2020 Results-

ANCHORAGE, Alaska--(BUSINESS WIRE)--Nov. 3, 2020-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) (“Alaska Communications” or the “Company”), together with Macquarie Capital (“Macquarie”), and GCM Grosvenor (“GCM”), through its Labor Impact Fund, L.P., announced today that they have entered into a definitive agreement pursuant to which the Company will be acquired by an affiliate of Macquarie and GCM in an all cash transaction valued at approximately $300 million, including debt. The transaction will result in Alaska Communications becoming a privately held company and is expected to close in the second half of 2021.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201103005202/en/

Alaska Communications microwave tower (Photo: Business Wire)

Alaska Communications microwave tower (Photo: Business Wire)

Under the terms of the agreement, an affiliate of Macquarie and GCM will acquire all the outstanding shares of Alaska Communications common stock for $3.00 per share in cash. This represents a premium of approximately 57% over the closing per share price of $1.91 on November 2, 2020, the last trading day prior to the date the merger agreement was executed, and a premium of approximately 50.8% over the 30-day volume weighted average price as of November 2, 2020.

David W. Karp, Chairman of the Alaska Communications Board of Directors, said, "After carefully evaluating Macquarie Capital’s and GCM’s offer, we are confident that this transaction is in the best interest of Alaska Communications and its stockholders. Macquarie Capital has a proven track record of delivering large and complex transactions globally on accelerated timelines, and GCM’s Labor Impact Fund provides strategy driven capital that we expect will generate real value for our customers and the Alaska Communications workforce."

Bill Bishop, President and Chief Executive Officer of Alaska Communications, stated, "This transaction with Macquarie Capital and GCM represents an exciting opportunity to enhance our financial position and expand our resources to better serve our customers. Macquarie Capital has extensive experience navigating the complexities and issues associated with public-to-private transactions, as well as addressing the various regulatory regimes associated with communications infrastructure transactions. It also has deep telecommunications expertise and a strong track record of investing in capital intensive businesses, which will be critical as we deliver on our strategy to utilize our superior customer service and fiber-based network solutions in providing industry-leading telecommunications products and services. Finally, GCM’s Labor Impact Fund provides strategic value to our business both through its experience in the telecommunications sector and in fostering partnerships with a unionized workforce. We firmly believe this transaction will allow us to enhance our expanded fiber network services and drive long-term value for our customers in Alaska and the Lower 48."

The transaction is subject to the approval of Alaska Communications' stockholders, regulatory approvals and other customary closing conditions. The transaction has fully committed debt and equity financing and is not subject to any condition with regard to financing. Equity financing will be provided by Macquarie Capital and GCM. Alaska Communications’ Board of Directors has unanimously approved the agreement with Macquarie and recommends that Alaska Communications’ stockholders approve the proposed merger and merger agreement. Alaska Communications expects to hold a Special Meeting of Stockholders to consider and vote on the proposed merger and merger agreement as soon as practicable after the mailing of the proxy statement to its stockholders.

Under the terms of the agreement, Alaska Communications may solicit superior proposals from third parties for a period of 30 calendar days (the “Go-Shop”) continuing through December 3, 2020. In accordance with the merger agreement, Alaska Communications’ Board of Directors, with the assistance of its advisors, intends to solicit superior proposals during this Go-Shop period.

TAR Holdings, LLC, which owns approximately 8.8% of the outstanding shares of Alaska Communications common stock, has entered into a voting agreement with Macquarie and GCM, among other things, to vote in favor of the merger. The voting agreement will automatically terminate upon the earliest of (a) the vote of stockholders on the merger, (b) any termination of the Merger Agreement, (c) any change in recommendation by the Board of Alaska Communications and (d) 14 months after the signing of the Merger Agreement.

Conference Call

The Company will host a conference call and live webcast on Thursday, November 5, 2020 at 2:00 p.m. Eastern Time to discuss the transaction and the third quarter of 2020 results. Parties in the United States and Canada can access the call at 1-800-430-8332 and enter code 1313142. All other parties can access the call at 1-323-289-6581 using the same code.

The live webcast of the conference call will be accessible from the "Events Calendar" section of the company's investor website (www.alsk.com). The webcast will be archived for 30 days. A replay of the conference call will also be available two hours after the call ends and will run until December 5, 2020 at 5 p.m. ET. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter code 1313142. All other parties can call 1-719-457-0820 and enter code 1313142.

Advisors

Macquarie Capital is serving as financial advisor to Macquarie Capital and GCM Grosvenor in connection with the transaction.

B. Riley Securities, Inc. is serving as financial advisor and Sidley Austin LLP is serving as legal advisor to Alaska Communications in connection with the transaction.

Goodwin Procter LLP and Morgan Lewis & Bockius LLP are serving as legal advisors to Macquarie and GCM, respectively, in connection with the transaction.

About Macquarie Capital

Macquarie Capital is the corporate advisory, capital markets and principal investment arm of Macquarie Group (ASX: MQG), offering a full spectrum of capital solutions, including capital raising services from equity, debt and private capital markets and principal investments from Macquarie’s own balance sheet. These offerings are reinforced through Macquarie Capital’s deep sector expertise in: business services, consumer, gaming and leisure, financial institutions, green energy, healthcare, industrials, infrastructure and energy, real estate, resources, technology and telecommunications and media sectors with 376 transactions completed, valued at $212 billion in the year ended March 31, 2020.

About GCM Grosvenor

GCM Grosvenor is a global alternatives investment firm with approximately $57 billion in assets under management in private equity, infrastructure, real estate, credit, absolute return strategies, and multi-asset class opportunistic investments. The firm has specialized in alternatives since 1971, and today its team of approximately 500 professionals serves a global client base of institutional and high net worth investors. GCM Grosvenor is headquartered in Chicago, with offices in New York, Los Angeles, London, Tokyo, Hong Kong, and Seoul.

GCM Grosvenor’s Labor Impact Fund, L.P., seeks to originate and execute infrastructure projects that leverage the inclusion of union labor as a contributing factor to enabling attractive risk-adjusted returns. The goal of the strategy is to find attractive infrastructure investment opportunities that can be unlocked through close cooperation across labor, government, and private capital.

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.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in connection with the proposed acquisition of the Company by Macquarie Capital and GCM Grosvenor, whereby the Company will become a wholly owned subsidiary of an affiliate of Macquarie Capital and GCM Grosvenor (the “proposed merger”), pursuant to a definitive Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Juneau Parent Co, Inc. (“Parent”) and Juneau Merger Co, Inc. (“Merger Sub”). The proposed merger will be submitted to the Company’s stockholders for their consideration at a special meeting of the stockholders. In connection therewith, the Company intends to file relevant materials with the United States Securities and Exchange Commission (SEC), including a proxy statement on Schedule 14A, which will be mailed or otherwise disseminated to the Company’s stockholders. STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE PROPOSED MERGER. Stockholders may obtain free copies of the definitive proxy statement, any amendments or supplements thereto and other documents containing important information about the Company or the proposed merger, once such documents are filed with the SEC, free of charge at the SEC's website at www.sec.gov, or from Alaska Communications at alsk.com or by directing a request to the Company’s Investor Relations Department at investors@acsalaska.com.

Participants in the Solicitation

The Company and certain of its directors and executive officers and other members of management and employees may be deemed to be "participants" in the solicitation of proxies from the Company’s stockholders in connection with the proposed merger. Information about the Company's directors and executive officers and their direct or indirect interests, by security holdings or otherwise, is set forth in the Company’s proxy statement on Schedule 14A for its 2020 annual meeting of stockholders filed with the SEC on April 29, 2020. To the extent holdings of the Company’s securities by such participants (or the identity of such participants) have changed, such information has been or will be reflected on Statements of Change in Ownership on Forms 3 and 4 subsequently filed with the SEC. Additional information regarding the participants in the proxy solicitation and a description of their direct or indirect interests, by security holdings or otherwise, will be included in the definitive proxy statement and may be included in relevant documents filed with the SEC regarding the proposed merger, if and when they become available. Free copies of these materials may be obtained as described in the preceding paragraph.

Alaska Communications Forward-Looking Statements

This press release 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. The reader is cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events and these include statements using the words such as will and expected, and similar statements. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the expectations of the Company. Risks and uncertainties include, but are not limited to: (i) the risk that the transaction may not be completed in a timely manner or at all, which may adversely affect the Company’s business and the price of its common stock, (ii) the failure to satisfy the conditions to the consummation of the transaction, including the adoption of the Merger Agreement by the stockholders of the Company, and the receipt of certain governmental and regulatory approvals, (iii) the failure of Parent and Merger Sub to obtain the necessary financing pursuant to the arrangements set forth in the commitment letters delivered pursuant to the Merger Agreement or otherwise, (iv) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, (v) the effect of the announcement or pendency of the transaction on the Company’s business relationships, operating results, and business generally, (vi) risks that the proposed transaction disrupts the Company’s current plans and operations and potential difficulties in the Company’s employee retention as a result of the transaction, (vii) the outcome of any legal proceedings that may be instituted against the Company or Parent or Merger Sub related to the Merger Agreement or the transaction contemplated thereby. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the businesses of the Company described in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020 and other reports and documents filed from time to time with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Copies of these filings are available online at https://www.alsk.com/. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and the Company assumes no obligation and does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. The Company does not give any assurance that it will achieve its expectations.

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

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

Source: Alaska Communications Systems Group, Inc.

Oct 20, 2020
Alaska Communications to Announce Q3 2020 Financial Results November 4 and Conduct Conference Call November 5


ANCHORAGE, Alaska--(BUSINESS WIRE)--Oct. 20, 2020-- Alaska Communications (NASDAQ: ALSK), will release financial results for the third quarter 2020 after markets close Wednesday, November 4, 2020. The company will host a conference call and live webcast to discuss operating results Thursday, November 5, 2020 at 2 p.m. ET. The live webcast will include a slide presentation. There will be a live question and answer session after prepared remarks.

Parties in the U.S. and Canada can access the call at 1-800-430-8332 and enter code 1313142. All other parties can access the call at 1-323-289-6581 using the same code.

The live webcast of the conference call will be accessible from the "Events Calendar" section of the company's investor website (www.alsk.com). The webcast will be archived for 30 days. A replay of the conference call will also be available two hours after the call ends and will run until December 5, 2020 at 5 p.m. ET. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter code 1313142. All other parties can call 1-719-457-0820 and enter code 1313142.

About Alaska Communications

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

Alaska Communications Systems Group, Inc. 
Media Contact:
Heather Marron, 907-564-1326
or
Investor Contact:
Tiffany Smith, 907-564-7556
investors@acsalaska.com

Source: Alaska Communications

Sep 14, 2020
Alaska Communications Expands Network Footprint Through Fiber Strategy


ANCHORAGE, Alaska--(BUSINESS WIRE)--Sep. 14, 2020-- Alaska Communications (NASDAQ: ALSK) has surpassed 150,000 total fiber miles.

“As one of the largest fiber providers in Alaska, we continue to upgrade and expand our existing fiber-based network,” said Diedre Williams, Alaska Communications senior vice president, operations. “This work enables us to increase bandwidth and capacity, connecting government, healthcare, education, commercial and consumer customers with high-speed, reliable and redundant service across Alaska and into the contiguous United States.”

The company is expanding its fiber footprint in four main areas, including:

  • Wireless backhaul project
  • Owned satellite earth station to increase capacity
  • Expanded fixed wireless presence
  • Fiber to the home

Wireless backhaul project

Despite the COVID-19 pandemic, Alaska Communications has made significant progress this year. Since January, the company has turned up an additional 24 sites for its carrier customer’s 5G wireless network in Anchorage. These 24 new sites added 8,000 fiber miles to the company’s network, allowing it to reach additional businesses and consumer customers.

Satellite services

Due to the remoteness of rural Alaska, many communities cannot be reached by fiber. Alaska Communications’ satellite services provide reliable connections and immediate reach, making mission-critical communications possible in the most challenging and remote environments. The company is actively selling service on its fiber-fed satellite earth station, reducing costs and increasing capacity for customers.

Fixed wireless

A fundamental component of the company’s rural broadband strategy is fixed wireless for the last mile. So far under its fixed wireless program, the company has lit up more than 13,500 locations through fixed wireless in rural communities. The fixed wireless service sites are mostly fed by extensions of the company’s fiber network. Many of these builds are funded in part through the Federal Communications Commission (FCC) Connect America Fund Phase II (CAF II) program. Read more about the company’s work to reach rural Alaskans with high speed services.

Fiber to the home

The company’s focus on fiber to the home is primarily in multi-dwelling units. Since January, the company has added 1,077 locations, bringing the total footprint to more than 7,000 locations, pushing higher broadband speeds and connectivity further into our consumer market.

An additional component of the company’s fiber initiative this year include upgrades to its Alaska fiber ring as well as subsea fiber with optical transport network.

“The demand for broadband continues to increase, and we are dedicated to providing a fiber network that meets the needs of our customers both now and in the future,” said Williams.

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.

Media Contact:
Heather Marron, 907-564-1326
Manager, Corporate Communications

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

Source: Alaska Communications

Aug 05, 2020
Alaska Communications Reports Second Quarter 2020 Results


  • Increased total revenue 3.6% year over year, driven by 12.1% fiber and broadband growth to business customers
  • Continued investment delivers total fiber miles to over 155K, including expansion with wireless carriers and fiber to the home
  • Reported Net Income attributable to Alaska Communications of $2.4 million, and Adjusted Free Cash Flow of $8.6 million
  • Increased Adjusted EBITDA to $16.5 million from $13.9 million year over year
  • Driven by market demand, the first Azure Stack Hub in Alaska to be located in Company data center
  • Reaffirms guidance despite COVID-19 impacts

ANCHORAGE, Alaska--(BUSINESS WIRE)--Aug. 5, 2020-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the second quarter ended June 30, 2020.

“During the second quarter 2020, our superior network and established partnerships delivered strong performance despite the pandemic, led by Business and Wholesale broadband growth of 12.1%, nearly all of which is fiber based revenue. We continue to strategically augment our existing fiber-based network, which includes the North Slope, a complete ring around the state of Alaska, the Pacific Northwest and two under-sea cables to the Lower 48.”

“In addition, we are strengthening our fiber infrastructure with several strategic initiatives to drive long-term growth. With interest from anchor customers, we will be the first Alaska provider of locally hosted Microsoft Azure Stack Hub cloud services, enriching users’ computing experience with greater flexibility, increased reliability and lower latency. Leveraging our marine assets, we won our first subsea 100Gb IRU to a carrier customer in April. In addition, we are enhancing our consumer platform, and with our fixed-wireless CAF II program, we now offer high-speed broadband access to over 16,000 rural Alaskans,” said Bill Bishop, president & CEO.

Three Months Ended June 30, 2020 Compared to 2019

  • Total revenue was $59.5 million, compared to $57.4 million, an increase of 3.6%.
    • Business and wholesale revenue was $40.0 million, compared to $37.0 million, up 8.1%.
    • Consumer revenue was $9.2 million, compared to $9.3 million, a decrease of 1.8%.
    • Regulatory revenue was $10.3 million, compared to $11.0 million, a decrease of 6.9%.
  • Operating expenses were $53.4 million, compared to $54.2 million.
  • Operating income was $6.1 million, compared to $3.2 million.
  • Net income attributable to Alaska Communications was $2.4 million, compared to $35 thousand.
  • Capital expenditures were $10.9 million, compared to $11.9 million, or excluding prefunded projects $7.8 million, compared to $11.9 million.
  • Adjusted EBITDA was $16.5 million, compared to $13.9 million.
  • Adjusted Free Cash Flow was $8.6 million, compared with Adjusted Free Cash Outflow of $3.1 million, or excluding prefunded projects $5.4 million, compared to an outflow of $3.1 million.

Balance Sheet Highlights

  • Cash was $46.0 million at June 30, 2020, compared to $28.3 million at December 31, 2019.
  • Net debt was $131.7 million at June 30, 2020, compared to $153.8 million at December 31, 2019.

Six Months Ended June 30, 2020 Compared to 2019

  • Total revenue was $117.7 million, compared to $114.3 million, an increase of 3.0%.
    • Business and wholesale revenue was $78.8 million, compared to $73.5 million, up 7.2%.
    • Consumer revenue was $18.3 million, compared to $18.5 million, a decrease of 1.2%.
    • Regulatory revenue was $20.6 million, compared to $22.2 million, a decrease of 7.3%.
  • Operating expenses were $105.8 million, compared to $105.1 million.
  • Operating income was $11.9 million, compared to $9.2 million.
  • Net income attributable to Alaska Communications was $4.8 million, compared to $0.3 million.
  • Capital expenditures were $18.4 million, compared to $20.4 million, or excluding prefunded projects $14.7 million, compared to $20.4 million.
  • Adjusted EBITDA was $32.6 million, compared to $29.1 million.
  • Adjusted Free Cash Flow was $18.7 million, compared with Adjusted Free Cash Outflow of $0.1 million, or excluding prefunded projects $11.2 million, compared to an outflow of $0.1 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’ chief financial officer, said, “We are pleased with our revenue performance, reflecting the success of our sales and delivery teams in key strategic verticals. Regarding capital spending, we have taken a conservative approach in the first half of the year. As our fiber growth projects began to ramp up during the second quarter, we expect capital spending on growth projects to increase in the latter half of the year resulting in total year expenditures consistent with our 2020 guidance. To date, we are encouraged we have not seen material negative impacts from COVID-19. On the contrary, we benefited from the CARES Act determination to accelerate AMT tax refunds, which will positively impact adjusted free cash flow in 2020. While the long-term impact of COVID remains unclear, we are confident in our strategic plan for growth and affirm our 2020 guidance.”

Special Dividend Paid

On June 18, 2020, Alaska Communications paid a one-time cash dividend of $0.09 per share, or $4.8 million, to shareholders of record as of April 20, 2020. This reflects the board’s confidence in the company’s strong performance over the past several years and management’s ability to drive business and wholesale revenue growth.

Russell 2000 and 3000 Index

Effective June 29, 2020, Alaska Communications was added as a member of the small-cap Russell 2000® Index, the broad-market Russell 3000® Index and the appropriate growth and value indexes.

2020 Guidance

Management maintains its 2020 financial guidance as follows:

  • Total Revenue to be between $232 million and $237 million
  • Adjusted EBITDA to be between $63 million and $65 million
  • Capital Expenditures excluding prefunded projects to be between $39 million and $43 million
  • Adjusted Free Cash Flow excluding prefunded projects to be between $8 million and $10 million

Conference Call

The Company will host a conference call and live webcast on Thursday, August 6, 2020 at 2:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-800-437-2398 and enter pass code 9971095. All other parties can access the call at 1-323-289-6576 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 5, 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 9971095. All other parties can call 1-719-457-0820 and enter pass code 9971095.

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.

Revenue Category Definitions

Growth Revenues are defined as business broadband, managed IT services, equipment sales and installations, wholesale broadband and consumer broadband. Legacy Revenues are defined as business voice and other, Wholesale voice and other, consumer voice and other, and Access. CAF II Revenues are defined as high cost support.

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 $21.2 million in the six-month period of 2020).

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 impacts of the COVID-19 pandemic on the economy of Alaska and on the Company, 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 North Slope 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,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
 
Operating revenues

$

59,456

 

$

57,395

 

$

117,722

 

$

114,304

 

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

 

27,134

 

 

26,356

 

 

54,248

 

 

51,983

 

Selling, general & administrative

 

16,225

 

 

18,718

 

 

31,619

 

 

35,374

 

Depreciation and amortization

 

10,033

 

 

9,200

 

 

19,873

 

 

17,879

 

Loss (gain) on disposal of assets, net

 

14

 

 

(95

)

 

100

 

 

(97

)

 
Total operating expenses

 

53,406

 

 

54,179

 

 

105,840

 

 

105,139

 

 
Operating income

 

6,050

 

 

3,216

 

 

11,882

 

 

9,165

 

 
Other income and (expense):
Interest expense

 

(2,739

)

 

(3,096

)

 

(5,698

)

 

(6,152

)

Loss on extinguishment of debt

 

-

 

 

(31

)

 

-

 

 

(2,830

)

Interest income

 

68

 

 

95

 

 

143

 

 

170

 

Other income (expense), net

 

33

 

 

(122

)

 

414

 

 

-

 

Total other income and (expense)

 

(2,638

)

 

(3,154

)

 

(5,141

)

 

(8,812

)

 
Income before income tax expense

 

3,412

 

 

62

 

 

6,741

 

 

353

 

 
Income tax expense

 

(996

)

 

(46

)

 

(1,956

)

 

(144

)

 
Net income

 

2,416

 

 

16

 

 

4,785

 

 

209

 

 
Less net loss attributable to noncontrolling interest

 

(24

)

 

(19

)

 

(42

)

 

(53

)

 
Net income attributable to Alaska Communications

$

2,440

 

$

35

 

$

4,827

 

$

262

 

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

$

2,440

 

$

35

 

$

4,827

 

$

262

 

 
Basic

$

0.05

 

$

0.00

 

$

0.09

 

$

0.00

 

Diluted

$

0.04

 

$

0.00

 

$

0.09

 

$

0.00

 

 
Weighted average shares outstanding:
Basic

 

53,976

 

 

53,799

 

 

53,799

 

 

53,591

 

Diluted

 

54,342

 

 

54,569

 

 

54,295

 

 

54,599

 

Schedule 2
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
 
June 30, December 31,
Assets

 

2020

 

 

2019

 

 
Current assets:
Cash and cash equivalents

$

44,379

 

$

26,662

 

Restricted cash

 

1,628

 

 

1,631

 

Short-term investments

 

134

 

 

134

 

Accounts receivable, net of allowance of $4,117 and $4,627

 

27,989

 

 

34,354

 

Materials and supplies

 

8,056

 

 

8,900

 

Prepayments and other current assets

 

13,591

 

 

9,617

 

Total current assets

 

95,777

 

 

81,298

 

 
Property, plant and equipment

 

1,436,987

 

 

1,424,904

 

Less: accumulated depreciation and amortization

 

(1,055,336

)

 

(1,042,546

)

Property, plant and equipment, net

 

381,651

 

 

382,358

 

 
Operating lease right of use assets

 

88,232

 

 

80,991

 

Other assets

 

10,191

 

 

12,598

 

Total assets

$

575,851

 

$

557,245

 

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

$

9,059

 

$

8,906

 

Accounts payable, accrued and other current liabilities

 

43,929

 

 

39,108

 

Advance billings and customer deposits

 

3,639

 

 

3,761

 

Operating lease liabilities - current

 

10,065

 

 

2,795

 

Total current liabilities

 

66,692

 

 

54,570

 

 
Long-term obligations, net of current portion

 

163,589

 

 

167,476

 

Deferred income taxes

 

5,497

 

 

4,403

 

Operating lease liabilities - noncurrent

 

79,117

 

 

78,767

 

Other long-term liabilities, net of current portion

 

89,268

 

 

78,520

 

Total liabilities

 

404,163

 

 

383,736

 

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

 

548

 

 

541

 

Treasury stock, 1,000 shares at cost

 

(1,812

)

 

(1,812

)

Additional paid in capital

 

162,240

 

 

161,844

 

Retained earnings

 

15,342

 

 

15,367

 

Accumulated other comprehensive loss

 

(5,434

)

 

(3,277

)

Total Alaska Communications stockholders' equity

 

170,884

 

 

172,663

 

Noncontrolling interest

 

804

 

 

846

 

Total stockholders' equity

 

171,688

 

 

173,509

 

 
Total liabilities and stockholders' equity

$

575,851

 

$

557,245

 

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,

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Cash Flows from Operating Activities:
Net income

$

2,416

 

$

16

 

$

4,785

 

$

209

 

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

 

10,033

 

 

9,200

 

 

19,873

 

 

17,879

 

Loss (gain) on disposal of assets, net

 

14

 

 

(95

)

 

100

 

 

(97

)

Amortization of debt issuance costs and debt discount

 

294

 

 

303

 

 

644

 

 

606

 

Loss on extinguishment of debt

 

-

 

 

31

 

 

-

 

 

2,830

 

Amortization of deferred capacity revenue

 

(1,711

)

 

(1,133

)

 

(3,071

)

 

(2,259

)

Stock-based compensation

 

409

 

 

(9

)

 

718

 

 

489

 

Deferred income tax expense

 

996

 

 

46

 

 

1,950

 

 

138

 

Charge for uncollectible accounts

 

(165

)

 

665

 

 

(394

)

 

(32

)

Amortization of ROU asset

 

679

 

 

583

 

 

1,257

 

 

1,148

 

Other non-cash (income) expense, net

 

(33

)

 

123

 

 

(66

)

 

244

 

Changes in operating assets and liabilities

 

11,678

 

 

3,128

 

 

21,176

 

 

7,178

 

Net cash provided by operating activities

 

24,610

 

 

12,858

 

 

46,972

 

 

28,333

 

 
Cash Flows from Investing Activities:
Capital expenditures

 

(10,949

)

 

(11,869

)

 

(18,412

)

 

(20,432

)

Capitalized interest

 

(315

)

 

(254

)

 

(631

)

 

(609

)

Change in unsettled capital expenditures

 

3,057

 

 

570

 

 

(702

)

 

(551

)

Proceeds on sale of assets

 

-

 

 

19

 

 

-

 

 

19

 

Net cash used by investing activities

 

(8,207

)

 

(11,534

)

 

(19,745

)

 

(21,573

)

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

 

(1,138

)

 

(10

)

 

(4,378

)

 

(171,768

)

Proceeds from the issuance of long-term debt

 

-

 

 

-

 

 

-

 

 

180,000

 

Debt issuance costs and discounts

 

-

 

 

(24

)

 

-

 

 

(2,683

)

Cash paid for debt extinguishment

 

-

 

 

(30

)

 

-

 

 

(1,252

)

Payment of cash dividend on common stock

 

(4,820

)

 

-

 

 

(4,820

)

 

-

 

Payment of withholding taxes on stock-based compensation

 

-

 

 

(143

)

 

(439

)

 

(448

)

Purchases of treasury stock

 

-

 

 

(149

)

 

-

 

 

(149

)

Proceeds from issuance of common stock

 

124

 

 

106

 

 

124

 

 

106

 

Net cash (used) provided by financing activities

 

(5,834

)

 

(250

)

 

(9,513

)

 

3,806

 

 
Change in cash, cash equivalents and restricted cash

 

10,569

 

 

1,074

 

 

17,714

 

 

10,566

 

 
Cash, cash equivalents and restricted cash, beginning of period

 

35,438

 

 

24,477

 

 

28,293

 

 

14,985

 

 
Cash, cash equivalents and restricted cash, end of period

$

46,007

 

$

25,551

 

$

46,007

 

$

25,551

 

 
Supplemental Cash Flow Data:

Interest paid

$

2,789

 

$

3,039

 

$

5,708

 

$

6,114

 

Dividends payable at June 30, 2020

$

32

 

$

-

 

$

32

 

$

-

 

Income taxes paid, net

$

-

 

$

-

 

$

-

 

$

10

 

Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA
(Unaudited, In Thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Net income

$

2,416

 

$

16

 

$

4,785

 

$

209

 

Add (subtract):
Interest expense

 

2,739

 

 

3,096

 

 

5,698

 

 

6,152

 

Loss on extinguishment of debt

 

-

 

 

31

 

 

-

 

 

2,830

 

Interest income

 

(68

)

 

(95

)

 

(143

)

 

(170

)

Depreciation and amortization

 

10,033

 

 

9,200

 

 

19,873

 

 

17,879

 

Other (income) expense, net

 

(33

)

 

122

 

 

(414

)

 

-

 

Loss (gain) on disposal of assets, net

 

14

 

 

(95

)

 

100

 

 

(97

)

Income tax expense

 

996

 

 

46

 

 

1,956

 

 

144

 

Stock-based compensation

 

409

 

 

(9

)

 

718

 

 

489

 

Cash severance expense

 

-

 

 

1,595

 

 

-

 

 

1,595

 

Net loss attributable to noncontrolling interest

 

24

 

 

19

 

 

42

 

 

53

 

 
Adjusted EBITDA

$

16,530

 

$

13,926

 

$

32,615

 

$

29,084

 

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 $21.2 million in the six-month period ended June 30, 2020).

 

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, and net loss attributable to noncontrolling interest.
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITES TO ADJUSTED FREE CASH FLOW
(Unaudited, In Thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

 
Net cash provided by operating activities

$

24,610

 

$

12,858

 

$

46,972

 

$

28,333

 

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

 

(7,827

)

 

(11,869

)

 

(14,663

)

 

(20,432

)

Capital expenditures for prefunded projects

 

(3,122

)

 

-

 

 

(3,749

)

 

-

 

Milestone payments received for prefunded projects

 

6,640

 

 

-

 

 

11,780

 

 

-

 

Deferred cost of sales for prefunded projects

 

175

 

 

-

 

 

175

 

 

-

 

Amortization of revenue for prefunded projects

 

(482

)

 

-

 

 

(709

)

 

-

 

Amortization of deferred capacity revenue

 

1,711

 

 

1,133

 

 

3,071

 

 

2,259

 

Amortization of GCI capacity revenue

 

(516

)

 

(516

)

 

(1,032

)

 

(1,027

)

Amortization of debt issuance costs and debt discount

 

(294

)

 

(303

)

 

(644

)

 

(606

)

Interest expense

 

2,739

 

 

3,096

 

 

5,698

 

 

6,152

 

Interest paid

 

(2,789

)

 

(3,039

)

 

(5,708

)

 

(6,114

)

Interest income

 

(68

)

 

(95

)

 

(143

)

 

(170

)

Deferred income tax expense

 

(996

)

 

(46

)

 

(1,950

)

 

(138

)

Income tax expense

 

996

 

 

46

 

 

1,956

 

 

144

 

Income taxes paid, net

 

-

 

 

-

 

 

-

 

 

(10

)

Charge for uncollectible accounts

 

165

 

 

(665

)

 

394

 

 

32

 

Amortization of ROU asset

 

(679

)

 

(583

)

 

(1,257

)

 

(1,148

)

Other (income) expense, net

 

(33

)

 

122

 

 

(414

)

 

-

 

Net loss attributable to noncontrolling interest

 

24

 

 

19

 

 

42

 

 

53

 

Other non-cash income (expense), net

 

33

 

 

(123

)

 

66

 

 

(244

)

Changes in operating assets and liabilities

 

(11,678

)

 

(3,128

)

 

(21,176

)

 

(7,178

)

Adjusted free cash flow

$

8,609

 

$

(3,093

)

$

18,709

 

$

(94

)

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

June 30,

 

June 30,

 

2020

 

 

 

2019

 

 

 

 

2020

 

 

 

2019

 

 
Adjusted EBITDA

$

16,530

 

$

13,926

 

$

32,615

 

$

29,084

 

 
Less:
Capital expenditures excluding prefunded projects

 

(7,827

)

 

(11,869

)

 

(14,663

)

 

(20,432

)

Amortization of GCI capacity revenue

 

(516

)

 

(516

)

 

(1,032

)

 

(1,027

)

Cash severance expense

 

-

 

 

(1,595

)

 

-

 

 

(1,595

)

Income taxes paid, net

 

-

 

 

-

 

 

-

 

 

(10

)

Interest paid

 

(2,789

)

 

(3,039

)

 

(5,708

)

 

(6,114

)

 

5,398

 

 

(3,093

)

 

11,212

 

 

(94

)

Impact of prefunded projects:
Capital expenditures for prefunded projects

 

(3,122

)

 

-

 

 

(3,749

)

 

-

 

Milestone payments received for prefunded projects

 

6,640

 

 

-

 

 

11,780

 

 

-

 

Deferred cost of sales for prefunded projects

 

175

 

 

-

 

 

175

 

 

-

 

Amortization of revenue for prefunded projects

 

(482

)

 

-

 

 

(709

)

 

-

 

 

3,211

 

 

-

 

 

7,497

 

 

-

 

Adjusted free cash flow*

$

8,609

 

$

(3,093

)

$

18,709

 

$

(94

)

* 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) provided by financing activities.
Schedule 7
 
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
REVENUE BY CUSTOMER GROUP
(Unaudited, In Thousands)
 
Three Months Ended Six Months Ended
June 30, June 30,

 

2020

 

 

2019

 

2020

 

 

2019

Business and wholesale revenue
Business broadband

$

16,258

 

$

15,437

$

31,897

 

$

30,704

Business voice and other

 

7,180

 

 

7,241

 

14,416

 

 

14,242

Managed IT services

 

1,300

 

 

1,517

 

2,527

 

 

3,176

Equipment sales and installations

 

1,192

 

 

1,008

 

2,606

 

 

1,888

Wholesale broadband

 

12,750

 

 

10,443

 

24,729

 

 

20,705

Wholesale voice and other

 

1,344

 

 

1,392

 

2,632

 

 

2,818

 
Total business and wholesale revenue

 

40,024

 

 

37,038

 

78,807

 

 

73,533

Growth in business and wholesale

 

8.1

%

 

7.2

%

Consumer revenue
Broadband

 

6,796

 

 

6,694

 

13,488

 

 

13,162

Voice and other

 

2,380

 

 

2,647

 

4,829

 

 

5,380

 
Total consumer revenue

 

9,176

 

 

9,341

 

18,317

 

 

18,542

 
Total business, wholesale, and consumer revenue

 

49,200

 

 

46,379

 

97,124

 

 

92,075

Growth in business, wholesale and consumer revenue

 

6.1

%

 

5.5

%

Growth in broadband revenue

 

9.9

%

 

8.6

%

 
Regulatory revenue
Access

 

5,333

 

 

6,093

 

10,751

 

 

12,382

High cost support

 

4,923

 

 

4,923

 

9,847

 

 

9,847

 
Total regulatory revenue

 

10,256

 

 

11,016

 

20,598

 

 

22,229

 
Total revenue

$

59,456

 

$

57,395

$

117,722

 

$

114,304

Growth in total revenue

 

3.6

%

 

3.0

%

 
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,

 

2020

 

 

2020

 

 

2019

 

 
Voice:
Business access lines

 

66,939

 

 

67,406

 

 

68,978

 

Consumer access lines

 

21,769

 

 

22,227

 

 

24,302

 

 
Voice ARPU business

$

27.68

 

$

27.14

 

$

26.84

 

Voice ARPU consumer

$

34.35

 

$

34.11

 

$

33.96

 

 
Broadband:
Business connections

 

14,661

 

 

14,689

 

 

15,141

 

Consumer connections

 

32,115

 

 

31,796

 

 

32,411

 

 
Broadband ARPU business

$

369.14

 

$

352.28

 

$

339.75

 

Broadband ARPU consumer

$

70.69

 

$

70.25

 

$

68.15

 

 
Monthly Average Churn:
Business voice

 

0.8

%

 

0.9

%

 

1.0

%

Consumer broadband

 

2.6

%

 

2.3

%

 

2.8

%

Consumer voice

 

1.0

%

 

1.1

%

 

1.5

%

Schedule 9
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
LONG TERM DEBT AND NET DEBT
(Unaudited, In Thousands)
 
June 30, December 31,

2020

2019

2019 senior secured credit facility due 2024

$ 173,396

$ 177,750

Debt discount - 2019 senior secured credit facilities due 2024

(1,863)

(2,234)

Debt issuance costs - 2019 senior secured credit facilities due 2024

(1,590)

(1,863)

Capital leases and other long-term obligations

2,705

2,729

Total debt

172,648

176,382

Less current portion

(9,059)

(8,906)

Long-term obligations, net of current portion

$ 163,589

$ 167,476

 
Total debt

$ 172,648

$ 176,382

Plus debt discounts and debt issuance costs

3,453

4,097

Gross debt

176,101

180,479

Cash and cash equivalents

(44,379)

(26,662)

Net debt

$ 131,722

$ 153,817

 

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.

Jul 21, 2020
Over 16,000 Rural Alaskans Get Access to High-speed Internet, Thanks to Alaska Communications Broadband Network Expansion


ANCHORAGE, Alaska--(BUSINESS WIRE)--Jul. 21, 2020-- Alaska Communications (NASDAQ: ALSK) has achieved a milestone in its broadband network expansion program, reaching over 16,000 rural Alaska residents with high-speed internet, with a goal of serving more than 32,000 rural Alaskans. The program started in 2017 and will continue through 2025. Communities now served with new or upgraded internet speeds include Delta Junction, Fairbanks, Homer, Hope, Kenai, Klawock, Larsen Bay, Ninilchik, North Kenai, North Pole, Seldovia and Soldotna. The company plans to deliver high-speed internet to Coffman Cove, Hoonah, Kake, Kasilof, Sterling and Thorne Bay by Dec. 31, 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200721005088/en/

Alaska Communications Field Technician Kristine Barber installs fixed wireless at a home in Sterling, Alaska. (Photo: Business Wire)

Alaska Communications Field Technician Kristine Barber installs fixed wireless at a home in Sterling, Alaska. (Photo: Business Wire)

The network expansion is funded in part through the Federal Communications Commission (FCC) Connect America Fund Phase II (CAF II) program.

“Alaska Communications is pleased to reach this important milestone expanding its high-speed broadband network to rural Alaskans. We know how critical broadband is for education, healthcare, economic development and quality of life. We thank the FCC along with Senator Murkowski, Senator Sullivan and Congressman Young for their support bringing this important infrastructure to our state,” said Bill Bishop, Alaska Communications president and CEO.

Once complete, the project will be the single largest deployment of affordable broadband under any one program in Alaska. Internet speeds are a minimum 10 Mbps download and 1 Mbps upload. However, the company has sought to deliver higher speeds, up to 50 Mbps download, 10 Mbps upload, whenever possible. The company is offering reliable, unlimited internet with no data caps for one, flat rate of $89.99 per month. Alaska Communications does not charge overage fees for data usage.

The FCC created the CAF II program in 2011 to facilitate the deployment of high-speed internet access in high-cost locations by transitioning Universal Service Fund money that was supporting rural landline voice service to the build-out of broadband infrastructure in rural communities. Under the terms of the current order, the FCC will provide approximately $19.7 million per year for 10 years, starting in 2016, to assist Alaska Communications in deploying broadband to about 32,000 locations in Alaska.

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.

Alaska Communications 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

Jul 20, 2020
Alaska Communications to Announce Q2 2020 Financial Results August 5 and Conduct Conference Call August 6


ANCHORAGE, Alaska--(BUSINESS WIRE)--Jul. 20, 2020-- Alaska Communications (NASDAQ: ALSK), will release financial results for the second quarter 2020 after markets close Wednesday, August 5, 2020. The company will host a conference call and live webcast to discuss operating results Thursday, August 6, 2020 at 2 p.m. ET. The live webcast will include a slide presentation. There will be a live question and answer session after prepared remarks.

Parties in the U.S. and Canada can access the call at 1-800-437-2398 and enter code 9971095. All other parties can access the call at 1-323-289-6576 using the same code.

The live webcast of the conference call will be accessible from the "Events Calendar" section of the company's investor website (www.alsk.com). The webcast will be archived for 30 days. A replay of the conference call will also be available two hours after the call ends and will run until September 5, 2020 at 5 p.m. ET. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter code 9971095. All other parties can call 1-719-457-0820 and enter code 9971095.

About Alaska Communications

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

Alaska Communications Systems Group, Inc. 
Media Contact:
Heather Marron, 907-564-1326
or
Investor Contact:
Tiffany Smith, 907-564-7556
investors@acsalaska.com

Source: Alaska Communications Systems Group, Inc.

Jul 01, 2020
Alaska Communications Brings Locally Hosted Microsoft Azure Services to Alaska, Increasing Security and Improving Latency


ANCHORAGE, Alaska--(BUSINESS WIRE)--Jul. 1, 2020-- Alaska Communications (NASDAQ: ALSK) will bring locally hosted Microsoft Azure Stack Hub cloud services to Alaska.

Alaska Communications, one of Alaska’s leading broadband and IT solutions providers, has utilized Azure Stack Hub to enhance computing by offering greater flexibility and reliability. Now the team will bring local cloud solutions to the state of Alaska, which will lower the latency users experience.

“We listened to our customers’ concerns about data storage, which led to this collaboration with Microsoft to expand to bring a hybrid cloud solution to Alaska businesses,” said Bill Bishop, President and CEO of Alaska Communications. “For many of our government customers, local storage of sensitive data and speed of recovery is important. We’re proud to partner with Microsoft to directly address our customers’ needs.”

Azure Stack Hub will give customers in the state of Alaska the ability to achieve low latency and the confidence of a local presence for sensitive applications. Customers may realize cost saving through eliminating the need to maintain on-premises infrastructure, reduced hardware support costs, and space and power.

“Alaska Communications was one of the first to bring Microsoft Azure ExpressRoute to Alaska,” said Jim Gutcher, Vice President, Strategy and Product Management for Alaska Communications. “We are continuing to innovate our IT portfolio by combining Azure Stack Hub with Azure ExpressRoute to give Alaska enterprises and government agencies the confidence to move to the cloud and realize the associated benefits.”

Natalia Mackevicius, Director, Azure Stack, Microsoft Corp., said, “Microsoft Azure Stack Hub, which is part of the Azure Stack portfolio, will allow organizations in Alaska the ability to transition to an Alaska-based cloud. As a Gold Partner, Alaska Communications has proven expertise in deploying Microsoft solutions to its customers and bringing Azure Stack Hub cloud services to Alaska is another demonstration of its commitment to Azure and supporting our mutual customers.”

Through technology, resources and expertise, Alaska Communications is proud to help Alaska organizations achieve their IT goals, grow their business and serve the residents of our state. Microsoft Azure Stack Hub from Alaska Communications will be available later this year.

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.

Media Contact
Heather Marron, 907-564-1326
Manager, Corporate Communications

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

Source: Alaska Communications

Jun 29, 2020
Alaska Communications Joins Russell 2000 and 3000 Indexes


ANCHORAGE, Alaska--(BUSINESS WIRE)--Jun. 29, 2020-- Alaska Communications (NASDAQ: ALSK) has been added as a member of the small-cap Russell 2000® Index and broad-market Russell 3000® Index, effective after the US market opens on June 29, as part of the 2020 Russell indexes reconstitution. The stock also was automatically added to the appropriate growth and value indexes.

“Alaska Communications is pleased to join the Russell 3000 and 2000 indexes. We believe our inclusion provides greater visibility and exposure to investors,” said Bill Bishop, Alaska Communications president and CEO.

Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for active investment strategies. Approximately $9 trillion in assets are benchmarked against Russell’s US indexes. Russell indexes are part of FTSE Russell, a leading global index provider.

For more information on the Russell indexes reconstitution, go to the “Russell Reconstitution” section on the FTSE Russell website.

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.

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

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

Source: Alaska Communications

May 06, 2020
Alaska Communications Reports First Quarter 2020 Results


  • Increased Total Revenue 2.4% compared to First Quarter 2019
  • Reported Net Income of $2.4 Million
  • Posted Adjusted EBITDA of $16.1 Million and Adjusted Free Cash Flow of $10.1 Million
  • Contracted first subsea 100Gb IRU in April

ANCHORAGE, Alaska--(BUSINESS WIRE)--May 6, 2020-- Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the first quarter of 2020.

“We are pleased with our first quarter 2020 results: Broadband revenues increased 7.2% year over year, and growth revenues continued to outpace declining legacy revenues. This strong business performance strengthens our foundation, and the company is well prepared to manage the challenges related to COVID-19.

“As a premier broadband and managed IT provider in Alaska, we deliver essential services. I am proud of how our employees have responded to the pandemic. They stepped up to serve our customers in this difficult time and continue to drive ahead to achieve our mission. In today’s environment, our customers are negotiating increasing amounts of remote work and our solutions are even more critical. While the small and medium business outlook is unclear, we expect broadband demand for enterprise customers to continue to grow, as demonstrated by the sale of a subsea 100Gb IRU to a carrier customer in April,” said Bill Bishop, president & CEO.

First Quarter 2020 Compared to First Quarter 2019

  • Total revenue was $58.3 million, compared to $56.9 million, an increase of 2.4%.
    • Business and wholesale revenue was $38.8 million, compared to $36.5 million, up 6.3%.
    • Consumer revenue was $9.1 million, compared to $9.2 million, a decrease of 0.7%.
    • Regulatory revenue was $10.3 million, compared to $11.2 million, a decrease of 7.8%.
  • Operating expenses were $52.4 million, compared to $51.0 million.
  • Operating income was $5.8 million, compared to $5.9 million.
  • Net income was $2.4 million, compared to $0.2 million.
  • Capital expenditures were $7.5 million, compared to $8.6 million.
  • Adjusted EBITDA was $16.1 million, compared to $15.2 million.
  • Adjusted Free Cash Flow was $10.1 million, compared to $3.0 million.

Balance Sheet Highlights

  • Cash was $35.4 million at March 31, 2020, compared to $28.3 million at December 31, 2019.
  • Net debt was $143.4 million at March 31, 2020, compared to $153.8 million at December 31, 2019.

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 our expectations for the quarter, and growth revenues increased 6.9% compared to last year. Dedicated to meeting the needs of our communities, we developed special internet services offerings to help people with tele-health, distance learning and remote work demands. Recognizing the potential financial impact to some residential and small businesses customers, we are providing flexible payment plans and will continue to monitor the situation. We are evaluating the effect of COVID-19 on our business from supply chain to collections. Although the near-term impact is uncertain, our business is keeping people connected, and we are confident in our long-term business plan and ability to drive shareholder value.”

2020 Guidance

Management maintains its 2020 financial guidance as follows:

  • Total Revenue to be between $232 million and $237 million
  • Adjusted EBITDA to be between $63 million and $65 million
  • Capital Expenditures to be between $39 million and $43 million
  • Adjusted Free Cash Flow to be between $8 million and $10 million

Conference Call

The Company will host a conference call and live webcast on Thursday, May 7, 2020 at 2:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-800-458-4121 and enter pass code 4240283. All other parties can access the call at 1-323-794-2597 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 June 6, 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 4240283. All other parties can call 1-719-457-0820 and enter pass code 4240283.

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.

Revenue Category Definitions

Growth Revenues are defined as business broadband, managed IT services, equipment sales and installations, wholesale broadband and consumer broadband. Legacy Revenues are defined as business voice and other, Wholesale voice and other, consumer voice and other, and Access. CAF II Revenues are defined as high cost support.

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 $9.9 million in the three-month period of 2020).

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 impacts of the COVID-19 pandemic on the economy of Alaska and on the Company, 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
March 31,

 

2020

 

 

2019

 

 
 
Operating revenues

$

58,266

 

$

56,909

 

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

 

27,114

 

 

25,627

 

Selling, general & administrative

 

15,394

 

 

16,656

 

Depreciation and amortization

 

9,840

 

 

8,679

 

Loss on disposal of assets, net

 

86

 

 

(2

)

 
Total operating expenses

 

52,434

 

 

50,960

 

 
Operating income

 

5,832

 

 

5,949

 

 
Other income and (expense):
Interest expense

 

(2,959

)

 

(3,056

)

Loss on extinguishment of debt

 

-

 

 

(2,799

)

Interest income

 

75

 

 

75

 

Other income, net

 

381

 

 

122

 

Total other income and (expense)

 

(2,503

)

 

(5,658

)

 
Income before income tax expense

 

3,329

 

 

291

 

 
Income tax expense

 

(960

)

 

(98

)

 
Net income

 

2,369

 

 

193

 

 
Less net loss attributable to noncontrolling interest

 

(18

)

 

(34

)

 
Net income attributable to Alaska Communications

$

2,387

 

$

227

 

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

$

2,387

 

$

227

 

 
Basic and Diluted

$

0.04

 

$

0.00

 

 
Weighted average shares outstanding:
Basic

 

53,186

 

 

53,382

 

Diluted

 

54,237

 

 

54,605

 

 
Schedule 2
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
 
March 31, December 31,
Assets

 

2020

 

 

2019

 

 
Current assets:
Cash and cash equivalents

$

33,818

 

$

26,662

 

Restricted cash

 

1,620

 

 

1,631

 

Short-term investments

 

134

 

 

134

 

Accounts receivable, net of allowance of $4,285 and $4,627

 

27,738

 

 

34,354

 

Materials and supplies

 

7,745

 

 

8,900

 

Prepayments and other current assets

 

12,535

 

 

9,617

 

Total current assets

 

83,590

 

 

81,298

 

 
Property, plant and equipment

 

1,429,446

 

 

1,424,904

 

Less: accumulated depreciation and amortization

 

(1,049,102

)

 

(1,042,546

)

Property, plant and equipment, net

 

380,344

 

 

382,358

 

 
Operating lease right of use assets

 

80,394

 

 

80,991

 

Other assets

 

10,307

 

 

12,598

 

Total assets

$

554,635

 

$

557,245

 

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

$

7,931

 

$

8,906

 

Accounts payable, accrued and other current liabilities

 

42,337

 

 

39,108

 

Advance billings and customer deposits

 

3,680

 

 

3,761

 

Operating lease liabilities - current

 

2,902

 

 

2,795

 

Total current liabilities

 

56,850

 

 

54,570

 

 
Long-term obligations, net of current portion

 

165,561

 

 

167,476

 

Deferred income taxes

 

4,550

 

 

4,403

 

Operating lease liabilities - noncurrent

 

78,207

 

 

78,767

 

Other long-term liabilities, net of current portion

 

80,606

 

 

78,520

 

Total liabilities

 

385,774

 

 

383,736

 

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

 

546

 

 

541

 

Treasury stock, 1,000 shares at cost

 

(1,812

)

 

(1,812

)

Additional paid in capital

 

161,709

 

 

161,844

 

Retained earnings

 

12,902

 

 

15,367

 

Accumulated other comprehensive loss

 

(5,312

)

 

(3,277

)

Total Alaska Communications stockholders' equity

 

168,033

 

 

172,663

 

Noncontrolling interest

 

828

 

 

846

 

Total stockholders' equity

 

168,861

 

 

173,509

 

 
Total liabilities and stockholders' equity

$

554,635

 

$

557,245

 

 
Schedule 3
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands)
 
Three Months Ended
March 31,

 

2020

 

 

2019

 

Cash Flows from Operating Activities:
Net income

$

2,369

 

$

193

 

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

 

9,840

 

 

8,679

 

Loss on disposal of assets, net

 

86

 

 

(2

)

Amortization of debt issuance costs and debt discount

 

350

 

 

303

 

Loss on extinguishment of debt

 

-

 

 

2,799

 

Amortization of deferred capacity revenue

 

(1,360

)

 

(1,126

)

Stock-based compensation

 

309

 

 

498

 

Deferred income tax expense

 

636

 

 

92

 

Charge for uncollectible accounts

 

(229

)

 

(697

)

Amortization of ROU asset

 

521

 

 

565

 

Other non-cash expense, net

 

(33

)

 

121

 

Changes in operating assets and liabilities

 

9,873

 

 

4,050

 

Net cash provided by operating activities

 

22,362

 

 

15,475

 

 
Cash Flows from Investing Activities:
Capital expenditures

 

(7,463

)

 

(8,563

)

Capitalized interest

 

(316

)

 

(355

)

Change in unsettled capital expenditures

 

(3,759

)

 

(1,121

)

Net cash used by investing activities

 

(11,538

)

 

(10,039

)

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

 

(3,240

)

 

(171,758

)

Proceeds from the issuance of long-term debt

 

-

 

 

180,000

 

Debt issuance costs and discounts

 

-

 

 

(2,659

)

Cash paid for debt extinguishment

 

-

 

 

(1,222

)

Payment of withholding taxes on stock-based compensation

 

(439

)

 

(305

)

Net cash used by financing activities

 

(3,679

)

 

4,056

 

 
Change in cash, cash equivalents and restricted cash

 

7,145

 

 

9,492

 

 
Cash, cash equivalents and restricted cash, beginning of period

 

28,293

 

 

14,985

 

 
Cash, cash equivalents and restricted cash, end of period

$

35,438

 

$

24,477

 

 
Supplemental Cash Flow Data:
Interest paid

$

2,919

 

$

3,075

 

Dividends payable at March 31, 2020

$

4,852

 

$

-

 

Income taxes paid, net

$

-

 

$

10

 

 
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA
(Unaudited, In Thousands)
 
Three Months Ended
March 31,

 

2020

 

 

2019

 

 
Net income

$

2,369

 

$

193

 

Add (subtract):
Interest expense

 

2,959

 

 

3,056

 

Loss on extinguishment of debt

 

-

 

 

2,799

 

Interest income

 

(75

)

 

(75

)

Depreciation and amortization

 

9,840

 

 

8,679

 

Other income, net

 

(381

)

 

(122

)

Loss on disposal of assets, net

 

86

 

 

(2

)

Income tax expense

 

960

 

 

98

 

Stock-based compensation

 

309

 

 

498

 

Net loss attributable to noncontrolling interest

 

18

 

 

34

 

 
Adjusted EBITDA

$

16,085

 

$

15,158

 

 
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 $9.9 million in the three-month period ended March 31, 2020).
 
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.