- 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
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. 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 ACTIVITIES TO ADJUSTED FREE CASH FLOW (Unaudited,
In Thousands) Three Months Ended March 31,
2020
2019
Net cash provided by operating activities
$
22,362
$
15,475
Adjustments to reconcile net cash provided by operating activities
to adjusted free cash flow: Capital expenditures excluding
prefunded projects
(6,836
)
(8,563
)
Capital expenditures for prefunded projects
(627
)
-
Milestone payments received for prefunded projects
5,140
-
Amortization of revenue for prefunded projects
(227
)
-
Amortization of deferred capacity revenue
1,360
1,126
Amortization of GCI capacity revenue
(516
)
(511
)
Amortization of debt issuance costs and debt discount
(350
)
(303
)
Interest expense
2,959
3,056
Interest paid
(2,919
)
(3,075
)
Interest income
(75
)
(75
)
Deferred income tax expense
(636
)
(92
)
Income tax expense
960
98
Income taxes paid, net
-
(10
)
Charge for uncollectible accounts
229
697
Amortization of ROU asset
(521
)
(565
)
Other income, net
(381
)
(122
)
Net loss attributable to noncontrolling interest
18
34
Other non-cash expense, net
33
(121
)
Changes in operating assets and liabilities
(9,873
)
(4,050
)
Adjusted free cash flow
$
10,100
$
2,999
Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. ADJUSTED FREE CASH FLOW (Unaudited, In
Thousands) Three Months Ended March 31,
2020
2019
Adjusted EBITDA
$
16,085
$
15,158
Less: Capital expenditures excluding prefunded projects
(6,836
)
(8,563
)
Amortization of GCI capacity revenue
(516
)
(511
)
Income taxes paid, net
-
(10
)
Interest paid
(2,919
)
(3,075
)
5,814
2,999
Impact of prefunded projects: Capital expenditures for prefunded
projects
(627
)
-
Milestone payments received for prefunded projects
5,140
-
Amortization of revenue for prefunded projects
(227
)
-
4,286
-
Adjusted free cash flow*
$
10,100
$
2,999
* Quarterly Adjusted Free Cash Flow fluctuates and should
not be viewed as an indicator of annual performance. Onetime
events, seasonality of capital spend and the timing of interest
payments may result in negative Adjusted Free Cash Flow in one or
more quarters.
NonGAAP Measures:Adjusted Free
Cash Flow is a non-GAAP liquidity measure and is defined as
Adjusted EBITDA, less recurring operating cash requirements which
include capital expenditures, cash income taxes refunded or paid,
cash interest paid, amortization of GCI capacity revenue, cash
severance expense for the Company's former Chief Executive Officer,
and cash receipts and payments, deferred costs and amortized
revenue and expense associated with certain prefunded special
projects as defined in the 2019 Senior Credit Facility.
Amortization of deferred revenue associated with our
interconnection agreement with GCI is excluded from Adjusted Free
Cash Flow because no cash was received by the Company in connection
with this agreement. Amortization of all other deferred revenue,
including that associated with other IRU capacity arrangements, is
included in Adjusted Free Cash Flow because cash was received by
the Company, typically at contract inception, and is being
recognized as revenue over the term of the relevant agreement.
See Schedule 3 for Net cash provided by operating
activities, Net cash used by investing activities, and Net cash
used by financing activities. See Schedule 5 for the
reconciliation of net cash provided by operating activities to
Adjusted Free Cash Flow.
Schedule 7 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE BY CUSTOMER
GROUP (Unaudited, In Thousands) Three Months
Ended March 31,
2020
2019
Business and wholesale revenue Business broadband
$
15,639
$
15,267
Business voice and other
7,236
7,001
Managed IT services
1,227
1,659
Equipment sales and installations
1,414
880
Wholesale broadband
11,979
10,262
Wholesale voice and other
1,288
1,426
Total business and wholesale revenue
38,783
36,495
Growth in business and wholesale
6.3
%
Consumer revenue Broadband
6,692
6,468
Voice and other
2,449
2,733
Total consumer revenue
9,141
9,201
Total business, wholesale, and consumer revenue
47,924
45,696
Growth in business, wholesale and consumer revenue
4.9
%
Growth in broadband revenue
7.2
%
Regulatory revenue Access
5,418
6,289
High cost support
4,924
4,924
Total regulatory revenue
10,342
11,213
Total revenue
$
58,266
$
56,909
Growth in total revenue
2.4
%
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
March 31, December 31, March 31,
2020
2019
2019
Voice: Business access lines
67,406
67,248
68,788
Consumer access lines
22,227
22,864
25,156
Voice ARPU business
$
27.14
$
26.95
$
25.21
Voice ARPU consumer
$
34.11
$
33.85
$
33.77
Broadband: Business connections
14,689
14,789
15,132
Consumer connections
31,819
31,476
32,811
Broadband ARPU business
$
352.28
$
345.93
$
334.87
Broadband ARPU consumer
$
70.19
$
70.82
$
65.44
Monthly Average Churn: Business voice
0.9
%
0.7
%
1.1
%
Consumer broadband
2.2
%
2.9
%
2.2
%
Consumer voice
1.1
%
1.3
%
1.1
%
Schedule 9 ALASKA COMMUNICATIONS SYSTEMS
GROUP, INC. LONG TERM DEBT AND NET DEBT (Unaudited,
In Thousands) March 31, December 31,
2020
2019
2019 senior secured credit facility due 2024
$
174,521
$
177,750
Debt discount - 2019 senior secured credit facilities due 2024
(2,033
)
(2,234
)
Debt issuance costs - 2019 senior secured credit facilities due
2024
(1,713
)
(1,863
)
Capital leases and other long-term obligations
2,717
2,729
Total debt
173,492
176,382
Less current portion
(7,931
)
(8,906
)
Long-term obligations, net of current portion
$
165,561
$
167,476
Total debt
$
173,492
$
176,382
Plus debt discounts and debt issuance costs
3,746
4,097
Gross debt
177,238
180,479
Cash and cash equivalents
(33,818
)
(26,662
)
Net debt
$
143,420
$
153,817
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200506005900/en/
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
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