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Alaska Communications Systems Reports Second Quarter 2013 Results

Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK) today reported financial results for its second quarter ended June 30, 2013.

“We are extremely pleased with our performance in the first half of the year. We achieved very strong rates of growth, with retail broadband revenues increasing 21% over last year. Debt reductions have been solid, with over $30 million through free cash flow generation in the first half of the year and $65 million from the AWN transaction in July. We are on track to achieve our goal of $100 million of net debt reductions this year. These results are evidence of our business plan at work.

“This quarter we also initiated a fiber-to-the-node build plan to significantly improve our broadband capabilities for business customers and sustain our long-term growth. We start with Anchorage this year and roll out to other areas of the state over the next couple of years. We are delivering on our business plan of growth and deleveraging, with an uncompromising focus on creating long-term value for our shareholders, customers and employees,” said Anand Vadapalli, President and CEO of Alaska Communications.

Financial Highlights: Second Quarter 2013 Compared to Second Quarter 2012
  • Revenues of $97.7 million increased by $7.7 million, or 8.6%, from $90.0 million in the prior year. $6.1 million of the growth was due to higher roaming revenue. Excluding this element of growth, overall revenue achieved 2.1% year over year growth.
    • Business and wholesale revenue increased $2.2 million, or 8.7%.
    • Consumer revenue increased $0.7 million, or 7.1%.
    • Wireless revenue increased $5.4 million, or 15.8%.
    • Access and CETC revenue declined, as expected, $0.6 million, or 3.0%.
    • Broadband revenue, as a percentage of total service revenue, was 52.3%, compared to 45.0% in the prior year.
  • Adjusted EBITDA of $34.0 million increased $8.4 million, or 32.8%, from $25.6 million in the prior year.
    • Cost of services and sales of $37.2 million declined $2.9 million or 7.2%, driven primarily by a $4.3 million decrease in device and accessory costs in 2013 caused by our launch of the iPhone in the second quarter of 2012, offset by an increase in roaming payables.
    • Selling, general & administrative, excluding the impact of AWN transaction costs, increased $1.9 million, or 7.5%, resulting primarily from an increase of $1.7 million in labor associated with higher incentive compensation expense in 2013 as compared to the prior year.

Metric Highlights: Second Quarter 2013 Compared to First Quarter 2013
  • Wireless subscribers increased by 328 to 114,419.
  • Wireless average monthly retail service revenue per subscriber (“ARPU”) increased by 1.0% or $0.51 to $52.68. Wireless broadband ARPU increased by 8.5% or $1.92 to $24.55.
  • Business broadband connections increased to 19,539 from 19,233 and business broadband ARPU increased by 4.2% or $6.94 to $171.29 from $164.35.
  • Consumer broadband connections increased to 39,559 from 39,334 and consumer broadband ARPU increased by 5.9% or $2.62 to $47.37.
  • Consumer access lines declined to 52,438 from 54,037, and business access lines decreased to 80,517 from 80,770.

“Alaska Communications continues to target free cash flow for debt reduction, and we are pleased to have made debt payments through June 30, 2013 of $30.4 million, achieving record debt reductions. Further, upon closing of the AWN transaction, we reduced debt by another $65 million, moving net debt to $444.9 million. The quarter was favorably impacted by a reversal of a previous reserve for an ongoing tax matter. We are pleased with the outcome of this matter as it further strengthens our balance sheet. On our upcoming conference call we will provide detailed guidance for the rest of the year in addition to discussing our longer term directional view now that we have the AWN transaction closed,” said Wayne Graham, ACS Chief Financial Officer.

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