Market Overview

Alaska Communications Reports Third Quarter 2017 Results

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-Alaska Communications reaffirms revenue and free cash flow
guidance-

Alaska Communications Systems Group, Inc. (NASDAQ:ALSK) today reported
financial results for the third quarter of 2017.

"Our sales performance in Business and Wholesale is consistent with our
expectations and reflects a robust delivery funnel that gives us
visibility into revenue for the quarters ahead. We posted growth in both
Total revenue as well as Business and Wholesale revenue, and continue to
see growth prospects in the long-term as demand drivers like video
streaming, wireless backhaul and cloud migration continue in their
robust trajectory.

"Additionally, we are advancing our fixed wireless technology strategy.
Fixed wireless provides a capital efficient mechanism to meet our CAF II
deployment obligations as well as a strong foundation for competitive
broadband to serve our mass market consumer and small business customers
in non-CAF II areas. We look forward to reporting progress over the
upcoming quarters," said Anand Vadapalli, president and CEO of Alaska
Communications.

Revenue Highlights: Third Quarter 2017 Compared to Third Quarter 2016

  • Total revenue:
    • Revenue increased to $56.7 million, up 0.4 percent from $56.5
      million.
    • Total broadband revenue reached $31.3 million, representing 55.3
      percent of total revenue and up 6.8 percent from $29.4 million.
  • Business and wholesale:
    • Comprised 61.5 percent of total revenue.
    • Revenue grew to $34.9 million, up 2.5 percent from $34.0 million.
    • Broadband revenue reached $25.0 million, up 8.3 percent from $23.1
      million.
  • Consumer:
    • Comprised 16.4 percent of total revenue.
    • Revenue was $9.3 million, down 0.7 percent from $9.4 million.
    • Broadband revenue was $6.3 million, up 1.2 percent from $6.2
      million.
  • Regulatory:
    • Comprised 22.1 percent of total revenue.
    • Revenue was $12.5 million, down 4.4 percent from $13.1 million.

Financial Metrics: Third Quarter 2017 compared to Third Quarter 2016

  • Operating income was $3.5 million, compared to $4.1 million.
  • Net income was $0.3 million in both periods.
  • Net cash provided by operating activities was $8.6 million, compared
    to $9.5 million.
  • Capital expenditures were $13.5 million, compared to $8.7 million.

Balance Sheet Metrics: September 30, 2017 compared to December 31,
2016

  • Cash was $11.2 million, compared to $21.2 million, reflecting the
    utilization of cash in the refinancing transactions and other changes
    in working capital.
  • Net debt was $172.4 million, compared to $162.8 million. This increase
    reflects the change in cash noted above.

Non-GAAP Metrics: Third Quarter 2017 compared to Third Quarter 2016

  • Adjusted EBITDA was $13.0 million, compared to $13.9 million.
  • Adjusted free cash flow was ($4.2) million, compared to $3.0 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.

Laurie Butcher, Alaska Communications senior vice-president of finance,
said: "Our results reflect uncertainty in the FCC's Rural Health Care
Program causing a negative impact on revenue of $0.7 million for both
the quarter and year to date and on Adjusted EBITDA of $1.5 million for
the quarter and $2.6 million year to date. While conservatively revising
Adjusted EBITDA guidance, we continue to proactively manage operating
expenses to mitigate the impacts. With our emphasis on capital
efficiency through the course of the year, we are also reducing capital
spending which will positively impact adjusted free cash flow. We remain
comfortable with both our revenue and Adjusted FCF guidance levels for
the year."

2017 Guidance:

  • Total Revenue between $229 million and $235 million, consistent with
    prior guidance
  • Adjusted EBITDA between $56 million and $59 million, reduced from $59
    million and $61 million
  • Capital Expenditures between $32 million and $35 million, reduced from
    $35 million and $38 million
  • Adjusted Free Cash Flow between $4 million and $7 million, consistent
    with prior guidance

Conference Call

The Company will host a conference call and live webcast on Wednesday,
November 8, 2017 at 3:00 p.m. Eastern Time to discuss the results.
Parties in the United States and Canada can access the call at
1-800-289-0459 and enter pass code 471977. All other parties can access
the call at 1-323-794-2558 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 90 days. A telephonic
replay of the conference call will also be available two hours after the
call and will run until December 8, 2017 at 6:00 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 9115915. All other parties can call 1-719-457-0820
and enter pass code 9115915.

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 of
these non-GAAP measures is 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 and on
our website in the investment data section. 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 outflows of $7.7 million
in the nine-month period of 2017).

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 including Rural Health Care Program
funding limitations, adverse economic conditions, the effects of
competition in our markets, unforeseen challenges when entering new
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,
including renegotiating our collective bargaining agreement, employee
benefit costs, our ability to control other operating costs, disruption
of our supplier's provisioning of critical products or services, 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 Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
 
 
Operating revenues $ 56,703 $ 56,483 $ 171,970 $ 169,073
 
Operating expenses:

Cost of services and sales (excluding depreciation and
amortization)

26,690 25,393 78,286 77,064
Selling, general & administrative 17,261 18,110 52,792 53,036
Depreciation and amortization 9,193 8,748 27,124 25,908
Loss on disposal of assets, net   40    
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