ANCHORAGE, Alaska–(BUSINESS WIRE)–Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported
financial results for the fourth quarter and full year ended December
31, 2018.

“Our 2018 results are robust with total revenue growth of 2.5% for full
year 2018 and annual adjusted EBITDA growth of 4.9%. Free cash flow
performance was strong at $7.2 million while our capital expenditures
position us for continued growth in future years.

“These results reflect our continued performance in Business and
Wholesale, driven by our growth engine of the larger Enterprise and
Carrier customers. Our technology differentiation was further
strengthened by investments in Fixed Wireless, satellite, and Software
Defined Networking, along with continued investments in our fiber
network particularly in support of 5G wireless backhaul.

“Attention to prudent cost management has been and will continue to be a
focus reflecting our commitment to adjusted EBITDA and adjusted free
cash flow improvements.

“With clear line of sight to continued growth in our Enterprise and
Carrier customer segment, combined with the recent balance sheet
refinancing work, we have conviction about high quality future operating
results, while we continue to explore all strategic opportunities for
shareholder value creation,” said Anand Vadapalli, president and CEO of
Alaska Communications.

Revenue Highlights

• Total revenue:
  • Revenue grew to $58.7 million for the fourth quarter of 2018,
    compared to $54.9 in the fourth quarter of 2017. Annual revenue
    grew to $232.5 million for 2018, from $226.9 million in 2017.
  • Total broadband revenue was $31.5 million for the fourth quarter
    of 2018, compared to $28.4 million for the fourth quarter of 2017,
    and was $125.4 million for 2018, compared to $123.1 million for
    2017.
• Business and wholesale:
  • Business and wholesale revenue was $37.0 million for the fourth
    quarter of 2018, compared to $33.1 million for the fourth quarter
    of 2017. 2018 revenue was $144.6 million, comprising 62.2 percent
    of total revenue, compared to $139.1 million for 2017, comprising
    61.3 percent of total revenue.
  • Business and wholesale broadband revenue was $25.0 million for the
    fourth quarter of 2018 compared to $22.1 million for the fourth
    quarter of 2017, and was $99.3 million for 2018, compared to $97.6
    million for 2017.
• Consumer:
  • Consumer revenue was $9.2 million for the fourth quarters of 2018
    and 2017. 2018 revenue was $37.3 million, comprising 16.0 percent
    of total revenue, compared to $37.1 million for 2017, comprising
    16.4 percent of total revenue.
  • Consumer broadband revenue was $6.4 million for the fourth quarter
    of 2018, compared to $6.2 million for the fourth quarter of 2017,
    and was $26.1 million for 2018, compared to $25.4 million for 2017.
• Regulatory:
  • Regulatory revenue was $12.5 million for the fourth quarter of
    2018, compared to $12.6 million for the fourth quarter of 2017.
    2018 revenue was $50.6 million, comprising 21.8 percent of total
    revenue, compared to $50.7 million for 2017, comprising 22.3
    percent of total revenue.

Financial Metrics

• Net income for the fourth quarter of 2018 was $1.7 million, compared
  to net loss of $2.9 million in the fourth quarter of 2017. 2018 net
  income was $9.1 million, compared to net loss of $6.1 million for 2017.

• Net cash provided by operating activities for the fourth quarter of
  2018 was $9.3 million, compared to $4.7 million in the fourth quarter
  of 2017. 2018 cash provided by operating activities was $56.2 million,
  compared to $30.4 million for 2017.
• Capital expenditures for the fourth quarter of 2018 were $12.5
  million, compared to $8.9 million fourth quarter of 2017. 2018
  capital expenditures were $38.0 million, compared to $32.9 million in
  2017.

Non-GAAP Metrics:

• Adjusted EBITDA for the fourth quarter of 2018 was $14.1 million,
  compared to $15.0 million for the fourth quarter of 2017. 2018
  Adjusted EBITDA was $60.2 million, compared to $57.3 million for 2017.
• Adjusted free cash outflow for the fourth quarter of 2018 was $3.0
  million, compared to free cash inflow of $2.3 million for the fourth
  quarter of 2017. 2018 Adjusted free cash flow was $7.2 million,
  compared to $8.8 million for 2017.

Reconciliations of non-GAAP financial measures to GAAP financial
measures can be found in tables at the end of this release.

Balance Sheet Metrics

• Cash was $15.0 million at December 31, 2018, compared to $16.2 million
  at December 31, 2017.
• Net debt was $161.2 million at December 31, 2018, compared to $177.2
  million at December 31, 2017.

Laurie Butcher, Alaska Communications senior vice-president of finance,
said, “We are pleased to report that we met or exceeded our guidance in
all areas for 2018. Additionally, on January 15, 2019 we closed a
transaction securing favorable terms for a new senior credit facility in
a volatile market, while increasing access to capital. As we enter 2019,
we are well positioned to perform to our business plan which is expected
to generate attractive adjusted free cash flow for the year.”

2019 Guidance

The company sets guidance as follows:

• Total Revenue to be between $230 million and $235 million
• Adjusted EBITDA to be between $60 million and $62 million
• Capital Expenditures to be between $40 million and $42 million
• Adjusted Free Cash Flow to be between $10 million and $12 million

Conference Call

The Company will host a conference call and live webcast on Thursday,
March 7, 2019 at 2:00 p.m. Eastern Time to discuss the results. Parties
in the United States and Canada can access the call at 1-888-205-6786
and enter pass code 366695. All other parties can access the call at
1-856-344-9315 and use the same code. There will be a live question and
answer session after the prepared remarks.

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 90 days. A telephonic
replay of the conference call will also be available two hours after the
call and will run until April 6, 2019 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 8903679. All other parties can call 1-719-457-0820 and
enter pass code 8903679.

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.

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 twelve-month period of 2018).

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, Federal and Alaska
Universal Service Fund changes, funding through the rural health care
universal service support mechanism and our ability to comply with the
regulatory requirements to receive those support payments, adverse
economic conditions, 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, our ability to service our
debt and refinance as required, 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, the impact of natural or man-made disasters,
changes in Company’s relationships with large customers, unforeseen
changes in public policies, regulatory changes, changes in technology
and standards, 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								Twelve Months Ended
		December 31,								December 31,
		2018				2017				2018				2017
Operating revenues		$	58,689			$	54,935			$	232,468			$	226,905
Operating expenses:
Cost of services and sales (excluding depreciation and amortization)			27,914				26,318				107,509				104,604
Selling, general & administrative			17,249				14,281				66,647				66,612
Depreciation and amortization			8,572				9,193				33,908				36,317
Loss (gain) on disposal of assets, net			69				(23	)			125				50
Total operating expenses			53,804				49,769				208,189				207,583
Operating income			4,885				5,166				24,279				19,322
Other income and (expense):
Interest expense			(3,238	)			(3,525	)			(13,429	)			(14,860	)
Loss on extinguishment of debt			–				–				–				(7,527	)
Interest income			82				7				156				34
Other (expense) income, net			(56	)			(154	)			23				(615	)
Total other income and (expense)			(3,212	)			(3,672	)			(13,250	)			(22,968	)
Income (loss) before income tax benefit (expense)			1,673				1,494				11,029				(3,646	)
Income tax benefit (expense)			39				(4,470	)			(2,041	)			(2,584	)
Net income (loss)			1,712				(2,976	)			8,988				(6,230	)
Less net loss attributable to noncontrolling interest			(8	)			(29	)			(92	)			(129	)
Net income (loss) attributable to Alaska Communications		$	1,720			$	(2,947	)		$	9,080			$	(6,101	)
Net income (loss) per share attributable to Alaska Communications:
Net income (loss) applicable to common shares		$	1,720			$	(2,947	)		$	9,080			$	(6,101	)
Basic and Diluted		$	0.03			$	(0.06	)		$	0.17			$	(0.12	)
Weighted average shares outstanding:
Basic			53,185				52,448				53,042				52,232
Diluted			54,277				52,448				53,840				52,232

Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
		December 31,				December 31,
Assets		2018				2017
Current assets:
Cash and cash equivalents		$	13,351			$	4,354
Restricted cash			1,634				11,814
Short-term investments			134				–
Accounts receivable, net of allowance of $3,936 and $2,729			31,472				32,535
Materials and supplies			6,737				7,046
Prepayments and other current assets			12,169				6,115
Total current assets			65,497				61,864
Property, plant and equipment			1,390,622				1,357,929
Less: accumulated depreciation and amortization			(1,017,442	)			(991,816	)
Property, plant and equipment, net			373,180				366,113
Deferred income taxes			498				3,394
Other assets			16,010				11,415
Total assets		$	455,185			$	442,786
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long-term obligations		$	2,289			$	17,030
Accounts payable, accrued and other current liabilities			40,957				36,148
Advance billings and customer deposits			4,024				4,213
Total current liabilities			47,270				57,391
Long-term obligations, net of current portion			168,023				168,959
Deferred income taxes			2,315				596
Other long-term liabilities, net of current portion			67,827				61,330
Total liabilities			285,435				288,276
Commitments and contingencies
Alaska Communications stockholders’ equity:
Common stock, $.01 par value; 145,000 authorized			533				525
Additional paid in capital			160,514				158,969
Retained earnings (accumulated deficit)			10,439				(3,579	)
Accumulated other comprehensive loss			(2,675	)			(2,396	)
Total Alaska Communications stockholders’ equity			168,811				153,519
Noncontrolling interest			939				991
Total stockholders’ equity			169,750				154,510
Total liabilities and stockholders’ equity		$	455,185			$	442,786

Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2018				2017				2018				2017
Cash Flows from Operating Activities:
Net income (loss)		$	1,712			$	(2,976	)		$	8,988			$	(6,230	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			8,572				9,193				33,908				36,317
Loss (gain) on the disposal of assets, net			69				(23	)			125				50
Amortization of debt issuance costs and debt discount			331				412				1,353				2,363
Loss on extinguishment of debt			–				–				–				7,527
Amortization of deferred capacity revenue			(1,101	)			(911	)			(4,098	)			(3,512	)
Stock-based compensation			548				667				1,757				1,509
Income tax (benefit) expense			(39	)			4,470				2,041				2,584
Charge for uncollectible accounts			374				1,015				2,745				3,577
Other non-cash expense, net			57				145				225				575
Income taxes receivable			(692	)			(8,629	)			(729	)			(8,052	)
Changes in operating assets and liabilities			(515	)			1,355				9,880				(6,302	)
Net cash provided by operating activities			9,316				4,718				56,195				30,406
Cash Flows from Investing Activities:
Capital expenditures			(12,525	)			(8,891	)			(37,957	)			(32,945	)
Capitalized interest			(545	)			(368	)			(2,001	)			(1,140	)
Change in unsettled capital expenditures			1,584				(507	)			(227	)			1,500
Proceeds on sale of assets			–				34				1				40
Net cash used by investing activities			(11,486	)			(9,732	)			(40,184	)			(32,545	)
Cash Flows from Financing Activities:
Repayments of long-term debt			(1,866	)			(2,088	)			(31,030	)			(176,466	)
Proceeds from the issuance of long-term debt			–				–				14,000				183,000
Debt issuance costs and discounts			–				–				–				(5,559	)
Cash paid for debt extinguishment			–				–				–				(5,522	)
Cash proceeds from noncontrolling interest			–				–				40				75
Payment of withholding taxes on stock-based compensation			(5	)			(4	)			(415	)			(605	)
Proceeds from issuance of common stock			100				123				211				239
Net cash used by financing activities			(1,771	)			(1,969	)			(17,194	)			(4,838	)
Change in cash, cash equivalents and restricted cash			(3,941	)			(6,983	)			(1,183	)			(6,977	)
Cash, cash equivalents and restricted cash, beginning of period			18,926				23,151				16,168				23,145
Cash, cash equivalents and restricted cash, end of period		$	14,985			$	16,168			$	14,985			$	16,168
Supplemental Cash Flow Data:
Interest paid		$	3,531			$	3,630			$	14,254			$	14,504
Income taxes (refunded) paid, net		$	(1	)		$	(322	)		$	3			$	(946	)

Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA
(Unaudited, In Thousands)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2018				2017				2018				2017
Net income (loss)		$	1,712			$	(2,976	)		$	8,988			$	(6,230	)
Add (subtract):
Interest expense			3,238				3,525				13,429				14,860
Loss on extinguishment of debt			–				–				–				7,527
Interest income			(82	)			(7	)			(156	)			(34	)
Depreciation and amortization			8,572				9,193				33,908				36,317
Other expense (income), net			56				154				(23	)			615
Loss (gain) on the disposal of assets, net			69				(23	)			125				50
Income tax (benefit) expense			(39	)			4,470				2,041				2,584
Stock-based compensation			548				667				1,757				1,509
Net loss attributable to noncontrolling interest			8				29				92				129
Adjusted EBITDA		$	14,082			$	15,032			$	60,161			$	57,327

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 twelve-month period ended December 31, 2018).

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 2017 Senior Credit Facility and 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 (loss) 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								Twelve Months Ended
			December 31,								December 31,
			2018				2017				2018				2017
Net cash provided by operating activities			$	9,316			$	4,718			$	56,195			$	30,406
Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow:
Capital expenditures				(12,525	)			(8,891	)			(37,957	)			(32,945	)
Milestone payments received for special projects				–				–				1,850				–
Deferred cost of sales for special projects				(500	)			–				(500	)			–
Amortization of deferred capacity revenue				1,101				911				4,098				3,512
Amortization of GCI capacity revenue				(522	)			(523	)			(2,071	)			(2,072	)
Amortization of debt issuance costs and debt discount				(331	)			(412	)			(1,353	)			(2,363	)
Interest expense				3,238				3,525				13,429				14,860
Interest paid				(3,531	)			(3,630	)			(14,254	)			(14,504	)
Interest income				(82	)			(7	)			(156	)			(34	)
Income taxes receivable				692				8,629				729				8,052
Income taxes refunded (paid), net				1				322				(3	)			946
Charge for uncollectible accounts				(374	)			(1,015	)			(2,745	)			(3,577	)
Other expense (income), net				56				154				(23	)			615
Net loss attributable to noncontrolling interest				8				29				92				129
Other non-cash expense, net				(57	)			(145	)			(225	)			(575	)
Changes in operating assets and liabilities				515				(1,355	)			(9,880	)			6,302
Adjusted free cash flow			$	(2,995	)		$	2,310			$	7,226			$	8,752

Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED FREE CASH FLOW
(Unaudited, In Thousands)
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2018				2017				2018				2017
Adjusted EBITDA		$	14,082			$	15,032			$	60,161			$	57,327
Less:
Capital expenditures			(12,525	)			(8,891	)			(37,957	)			(32,945	)
Amortization of GCI capacity revenue			(522	)			(523	)			(2,071	)			(2,072	)
Income taxes refunded (paid), net			1				322				(3	)			946
Interest paid			(3,531	)			(3,630	)			(14,254	)			(14,504	)
			(2,495	)			2,310				5,876				8,752
Impact of special projects:
Milestone payments received for special projects			–				–				1,850				–
Deferred cost of sales for special projects			(500	)			–				(500	)			–
			(500	)			–				1,350				–
Adjusted free cash flow*		$	(2,995	)		$	2,310			$	7,226			$	8,752

* 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, less cash income taxes refunded or paid,
cash interest paid, amortization of GCI capacity revenue 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.

Contacts

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
[email protected]

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