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Alaska Communications Systems Reports Third Quarter 2013 Results

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

“We are pleased to report steady performance to our business plan. Another quarter of solid broadband revenue performance has driven total wireline revenue growth, representing an important way we create value. Consistent with the other mechanism in our plan to create value by strengthening our balance sheet, we achieved meaningful de-leveraging and strong cash flows in this quarter. Closing the AWN transaction allows us to direct our capital more efficiently to further broadband growth,” said Anand Vadapalli, President and Chief Executive Officer of ACS.

Year-Over-Year Financial Highlights for the Quarter:

The third quarter represents the first reporting period following the Alaska Wireless Network, LLC (“AWN”) close and we encourage readers to review our press release schedules for description of changes in mapping of certain revenue categories. Further, we are providing additional supplemental information for readers to understand the AWN preferred distribution structure and its impact to our results.
  • Wireline revenues include business and wholesale, consumer and access revenues. We are focused on achieving growth in wireline revenues by driving broadband revenue performance. Wireline revenues were $50.1 million which increased by $0.6 million, or 1.2%.
    • Business and wholesale revenue increased $0.9 million, or 3.7%, which was driven by broadband revenue growth of 17.0%.
    • Consumer revenue increased $0.5 million, or 5.3%, with broadband revenue growth of 21.3%.
    • Access revenue declined, as expected, $0.9 million, or 5.7%, due to lower switched, special and other access revenue.
  • Wireless and backhaul revenue was $33.8 million and, as expected, declined year-over-year.
    • Retail service revenue declined $1.0 million, or 5.5%.
    • As expected, foreign roaming revenue declined $13.3 million, as roaming revenue moved to AWN.
    • CETC revenue increased 3.2%. CETC is now a pass-through under the AWN structure and has no impact on Adjusted EBITDA.
  • Adjusted EBITDA was $24.8 million and free cash flow was $3.5 million. The decline in Adjusted EBITDA compared to last year was anticipated following the close of AWN.
    • The AWN preferred distribution contributed $9.6 million to Adjusted EBITDA.
    • Free cash flow was impacted by higher levels of capital spending associated with the summer build season.
  • Net debt, which represents total debt less cash and cash equivalents, stands at $404.4 million. This represents a decrease of $134.2 million, or 24.9%, since December 31, 2012, evidencing commitment to deleveraging.

Sequential Metric Highlights: Third Quarter 2013 Compared to Second Quarter 2013
  • Business broadband connections increased by 112, or 0.6%, to 19,216 and business broadband ARPU remained relatively flat at $175.00.
  • Consumer broadband connections increased by 506, or 1.3%, to 38,117 and consumer broadband ARPU declined slightly by 1.2% to $48.63.
  • Consumer access lines declined by 1,716, or 3.3%, to 50,722 and business access lines decreased by 446, or 0.6%, to 80,071.
  • Wireless connections declined by 2,305, or 2.0%, to 112,114. Connections were impacted by 782 fewer lifeline customers associated with continued compliance with new certification rules, and 2,453 fewer post-pay connections of which 714 were non-revenue-generating-internal-use connections that were disconnected as part of the AWN transaction, partially offset by an increase of 930 in prepaid connections.
  • Wireless broadband ARPU increased 7.5%. Retail wireless ARPU declined slightly to $52.08.

“This is the first quarter of results following the close of the AWN transaction, and we have provided additional information in this press release to enable readers to evaluate our performance under this new operating structure. During our upcoming conference call we will walk the readers through this information. Our path to deliver shareholder value is growing wireline and total broadband revenue, while strengthening the business through debt reductions. Our financial results are in-line with our expectations, with solid free cash flow generation for the year,” said Wayne Graham, Chief Financial Officer of ACS.

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