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GCI REPORTS FOURTH QUARTER 2016 FINANCIAL RESULTS

GCI REPORTS FOURTH QUARTER 2016 FINANCIAL RESULTS

Net Loss of $16 million and $4 million for the Year

Consolidated Revenue of $232 million and $934 million for the Year

Adjusted EBITDA of $68 million and $288 million for the Year

March 1, 2017, Anchorage, Alaska - General Communication, Inc. ("GCI") (GNCMA) announces its results for the fourth quarter and year end 2016.

We achieved significant operational successes in the fourth quarter, the most prominent of which is the migration of all the acquired wireless subscribers and the shutdown of an additional wireless billing system as promised.  The elimination of four billing platforms in 2016 not only saves us $5 million per year in direct payments to those vendors, it also drives simplicity in our business for both our customers and the hundreds of front-line employees that used them.

Topline revenue growth in 2016, absent the effect of our roaming and backhaul arrangements, was one percent.  We expect similar revenue opportunities in 2017, and as such are focusing on growing free cash flow by continuing our efforts to simplify our business.  In addition to the billing system savings and the circuit cost savings we expect to generate meaningful savings from our procurement initiative in 2017 and beyond.

Operating and Financial Highlights

Our fourth quarter revenues were $232 million, a decline of $4 million sequentially and $9 million from the fourth quarter of 2015. Adjusted EBITDA of $68 million was down $10 million from the third quarter and down $3 million year-over-year. The declines, both sequentially and year-over-year, were driven by lower roaming and backhaul revenues. Migrating all of the acquired subscribers off of the old billing system resulted in a write-off of the remaining term of that contract, driving SG&A costs up.  SG&A was also negatively impacted by inventory write-offs and higher healthcare costs in the fourth quarter of 2016.

Wireless

Wireless segment revenues were $50 million for the quarter, down $10 million or 16 percent year-over-year and $2 million or four percent sequentially. The year-over-year decline is driven primarily by roaming and backhaul revenue reductions of $8 million.  The sequential decline is due to the remaining seasonality in our roaming revenues.

The wireless segment revenue detail is as follows:

($ millions) 4Q16 4Q15 3Q16
Wholesale Wireless & Other 19 21 18
Roaming and Backhaul 18 26 21
USF Support 13 13 13
Total Wireless Revenue 50 60 52

Wireless segment Adjusted EBITDA was $32 million for the quarter, declining $7 million or 17 percent over the fourth quarter of 2015 and was flat compared with the third quarter of 2016. The year-over-year decline in Adjusted EBITDA was a result of our roaming and backhaul agreements.  The sequential comparison was tempered by lower SG&A due to the absence of costs associated with the sale of our urban wireless towers and rooftop locations in the third quarter of 2016.

Wireline

Wireline segment revenues of $182 million during the quarter were up $1 million over the fourth quarter of 2015 and down $2 million or one percent over the prior quarter. Fewer wireless subscribers and lower wireless ARPU pressured these revenues but were offset by gains in business data.

Adjusted EBITDA for the quarter was $36 million, up $4 million or 12 percent year-over-year and down $10 million or 23 percent from the previous quarter. The year-over-year gain in Adjusted EBITDA was a result of improved margin in our business data product as we shed costs associated with the economically challenged professional services business. We have also made good progress reducing the costs we pay for circuits. Sequentially, the Adjusted EBITDA decline was the result of higher SG&A costs from the one-time expense of writing off the billing system used during the transition of our acquired wireless subscribers, inventory write-offs as well as higher healthcare costs.

Wireline - Consumer

Consumer revenues of $84 million in the fourth quarter are down $6 million or six percent year-over-year and down $4 million or five percent sequentially. Declines from the migration of our acquired wireless subscribers and lower ARPU as a result of equipment installment plans led to lower wireless revenue.  Fewer video subscribers on a year-over-year basis pushed our video revenue down when compared with the fourth quarter of 2015. Sequentially, the decline is related to equipment sales.

Our total wireless subscribers were down 3,900 in the fourth quarter. These declines are due to billing system eliminations and normal seasonal changes in Lifeline and pre-paid subscribers.

Our cable modem subscribers were up 300 year-over-year and up 600 sequentially. We introduced the first product in our "Better than Unlimited" campaign, highlighting our enhanced red internet product. The red plan provides our signature 1 gigabit speed with 1 terabyte of data each month, which if entirely consumed then delivers endless streaming at speeds comparable to our competitors average speeds on their unlimited plans. 

Wireline - GCI Business

GCI Business revenues were $98 million for the quarter, up $6 million or seven percent year-over-year and up $2 million or two percent sequentially.  These gains are due to growth in the data product.

SG&A

SG&A expenses were $94 million during the quarter, up $5 million or six percent over last year and up $5 million or five percent sequentially. Growth in SG&A spending during the quarter is a result of a $2 million write-off of a legacy wireless billing platform, a $2 million write-off of obsolete inventory and higher employee healthcare costs in the fourth quarter of the year.

Capital Expenditures

Capital expenditures for the quarter totaled $67 million, bringing the total for the year to $209 million.

Stock Buybacks

GCI repurchased 0.6 million shares of its Class A common stock during the fourth quarter at a cost of $9 million, or $15.31 per share.  For the year, we repurchased 3.5 million shares at a cost of $55 million or $15.68 per share.

Leverage

We have guided to net leverage in the range of 4.0x to 4.5x.  After adding back the roaming adjustment, as our new Senior Credit Facility allows, we are just slightly over at 4.6x net leverage.

In 2017, our cash flow for the purposes of our senior credit facility leverage calculations will include a $20 million add-back for roaming cash received in excess of revenue.

The following table may be helpful to understand our leverage:

($ millions) 2016 Leverage on EBITDA Leverage on Cash Flow
Total Debt 1,485 5.2x 4.7x
Less Cash (19) (0.1x) (0.1x)
Net Debt 1,466 5.1x 4.6x
Adjusted EBITDA 288  
Add back of roaming cash flows allowed by new credit facility 30  
Cash Flow 318  

2016 Versus Guidance

  • Our 2016 revenue was $934 million, at the bottom end of our $930 million to $980 million range.
  • Adjusted EBITDA in 2016 was $288 million which is within our upwardly revised guidance range $280 to $295 million.
  • Capital expenditures were $209 million versus guidance of $210 million.

2017 Guidance

Adjusted EBITDA is expected to be between $300 million and $325 million in 2017.

Capital expenditures are expected to be approximately $165 million in 2017, a reduction of 21 percent from our 2016 expenditures.  This reduction represents our commitment to growing free cash flows in the face of continuing signs of economic challenges for Alaska.

Use of Non-GAAP Measure

Adjusted EBITDA is presented herein and is a non-GAAP measure. See our attached financials for a reconciliation of this non-GAAP measure to the nearest GAAP measure.

Adjusted EBITDA guidance is a forward-looking non-GAAP financial measure presented herein. Reconciliation to the most directly comparable GAAP financial measure is not provided because we are unable to provide such reconciliation without unreasonable effort.  The inability to provide a reconciliation is due to the uncertainty and inherent difficulty regarding the occurrence, the financial impact and the periods with respect to recognition of future GAAP financial measures.  We also believe that such a reconciliation would imply an inappropriate degree of precision.  For the same reasons, we are unable to address the probable significance of the unavailable information.

Conference Call

The company will hold a conference call to discuss the financial results on Thursday, March 2nd, at 2:00 p.m. (Eastern). To access the call, call the conference operator between 1:45-2:00 p.m. (Eastern) at 844-850-0551 (International callers should dial +1-412-902-4197) and identify your call as "GCI".

In addition to dial-up access, GCI will make available net conferencing. To access the call via net conference, log on to ir.gci.com and follow the instructions.

A replay of the call will be available, beginning at 4:00pm, for 72-hours by dialing 877-344-7529, access code 10094070 (International callers should dial +1-412-317-0088).

Forward-Looking Statement Disclosure

The foregoing contains forward-looking statements regarding GCI`s expected results that are based on management`s expectations as well as on a number of assumptions concerning future events. Actual results might differ materially from those projected in the forward-looking statements due to uncertainties and other factors, many of which are outside GCI`s control. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in GCI`s cautionary statement sections of Forms 10-K and 10-Q filed with the Securities and Exchange Commission.

About GCI

GCI is the largest Alaska-based and operated, integrated telecommunications provider, offering wireless, voice, data, and video services statewide. Learn more about GCI at www.gci.com.

Contacts:
Investors: Kyle Jones, 907.868.7105, kjones@gci.com
Media: Heather Handyside, 907.868.6838, hhandyside@gci.com

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Press Release Financials 12-31-2016


This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: General Communication Inc via GlobeNewswire

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