May 3, 2017
Net Loss of $55 million
Consolidated Revenue of $228 million
Pro Forma EBITDA of $73 million
Anchorage, Alaska – General Communication, Inc. (“GCI”) (NASDAQ: GNCMA) announces its results for the first quarter of 2017.
Liberty Interactive Transaction:
On April 4th GCI and Liberty Interactive Corporation announced the signing of an agreement to combine GCI with certain assets of the Liberty Ventures Group (“Liberty Ventures”). The new company will be named GCI Liberty. As part of the transaction GCI shareholders will receive 0.63 shares of a reclassified GCI Class A common stock and 0.20 shares of a new GCI Series A preferred stock. The exchange ratios were determined based on a total consideration of $32.50 per share for existing GCI common stock, comprised of $27.50 per share in reclassified GCI Class A common stock and $5.00 per share in a newly issued GCI preferred stock, and a Liberty Ventures reference price of $43.65 (with no premium paid for shares of GCI Class B common stock). The transaction is subject to regulatory review, and applicable regulatory filings are in process. The transaction is expected to close in the first quarter of 2018.
We recently received consent from our bondholders to waive any change of control put rights in connection with the transaction. We are in the process of completing an amendment of our Senior Credit Facility to allow for the transaction.
The net income for the quarter was negatively affected by a significantly higher income tax expense for the quarter than we expect to record for the entire year. This highly unusual outcome does not affect Adjusted EBITDA, Cash Flow or our Net Operating Losses. More information about this anomaly can be seen in our 10-Q.
In 2017, we merged our former Wireless and Wireline segments into one operating segment to reflect changes in how we manage the business. The former wireless segment revenues are now reflected in the consumer and business customer groups as follows:
- Wholesale Wireless is reported in Consumer or Business wireless, according to which customer type is providing that revenue.
- Roaming and Backhaul is reported in Business wireless.
- High Cost USF Revenue is reported in Consumer wireless revenue.
Operating and Financial Highlights
Our first quarter revenues were $228 million, a decline of $4 million sequentially and $3 million from the first quarter of 2016 (down approximately 1% year-over-year) driven by weakness in consumer wireless and video. Pro Forma EBITDA, which is Adjusted EBITDA plus $4 million of one-time Liberty transaction costs in the quarter, was $73 million. This is up $5 million from the previous quarter and $2 million year over year. Pro Forma EBITDA is up due to savings achieved in procurement initiatives and our circuit costs.
As we mentioned in our year end call we are focusing on operating efficiencies and cost savings. This quarter we had Pro Forma EBITDA margins of 32.0 percent compared to 30.6 percent in the first quarter of 2016 and 29.1 percent in the fourth quarter of 2016.
Consumer revenues of $107 million in the first quarter are down $7 million or six percent year-over-year and down $4 million or three percent sequentially. Declining wireless plan fees, which was an industry wide trend in the first quarter, was partially responsible for the revenue declines. Our video subscribers were down six percent year-over year which also contributed to the declining revenue.
Our total wireless subscribers were down 500 in the first quarter and were associated with pre-paid subscriber losses. Our “Better than Unlimited” wireless plan is gaining traction in the market and we will be able to offer non-907 phone number porting with our plans soon.
GCI Business revenues were $121 million in the first quarter. This is up $4 million or three percent year-over-year and flat sequentially. Sales of data products led to the revenue increase in business, which was partially offset by declines in voice and video.
SG&A expenses were $94 million during the quarter. Excluding the one-time Liberty transaction costs of $4 million, the expenses were up $2 million or two percent year-over-year and down $4 million or five percent sequentially. The sequential decline is a result of one-time charges in the fourth quarter of 2016.
Capital expenditures for the quarter totaled $28 million.
After adding back the roaming adjustment and Liberty transaction costs, our net debt to trailing 12 months Adjusted EBITDA was 4.7x as of March 31st 2017.
Pro Forma EBITDA is expected to be between $300 million and $325 million in 2017, excluding costs related to the Liberty transaction.
Capital expenditures are expected to be approximately $165 million in 2017.
Use of Non-GAAP Measure
Pro-Forma and Adjusted EBITDA are presented herein and are non-GAAP measures. See our attached financials for a reconciliation of these non-GAAP measures 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.
The company will hold a conference call to discuss the financial results on Thursday, May 4th, 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 10104277 (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.
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.
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