- 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
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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005593/en/
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
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