Business Wire | Mar 15, 2021 08:56AM EDT

Alaska Communications Reports Fourth Quarter and Year-end 2020 Results

Mar. 15, 2021

ANCHORAGE, Alaska--(BUSINESS WIRE)--Mar. 15, 2021--Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the fourth quarter and year ended December 31, 2020.

"We are pleased with our strong financial performance for 2020, driven by broadband growth and increased customer cloud infrastructure during this unprecedented year. We are proud of our team and their continued exemplary customer service to our communities, particularly the education and healthcare areas. During 2020, we continued to invest in our network and expanded our broadband service by more than 3,700 locations in underserved areas of Alaska, an increase in locations of approximately 33%. In addition, we began mesh fixed wireless trials, offering internet speeds up to 1 Gig. In 2021, we plan to expand our mesh network as part of our strategy to upgrade one third of our network, extending our reach to approximately 42,000 new and existing customer locations with new or improved service.

"On March 12, 2021, our shareholders approved our merger with a subsidiary of ATN International, Inc. This transaction positions us to remain the premier communications partner within the state of Alaska, while providing significant opportunities to grow. We expect synergies in fiber infrastructure expansion and in the latest technologies for commercial customers, including next-generation managed services and private network solutions," said Bill Bishop, President & CEO.

Fourth Quarter 2020 Compared to Fourth Quarter 2019

* Total revenue was $62.3 million, compared to $58.3 million, an increase of 7.0%. Business and wholesale revenue was $43.2 million, compared to $38.3 million, up 12.7%. Consumer revenue was $9.0 million, compared to $9.2 million, a decrease of 2.6%. Regulatory revenue was $10.2 million, compared to $10.8 million, a decrease of 5.2%. * Operating expenses were $68.2 million, including $9.6 million of transaction expenses, compared to $51.3 million. * Operating loss was $5.8 million, compared to operating income of $7.0 million. * Net loss attributable to Alaska Communications was $8.2 million, compared to net income of $2.6 million. * Capital expenditures were $15.3 million, compared to $13.2 million, or excluding prefunded projects were $13.5 million, compared to $10.0 million. * Adjusted EBITDA was $14.9 million, compared to $17.9 million. * Adjusted Free Cash Flow was $2.9 million, compared to $9.7 million, or excluding prefunded projects was $2.4 million, compared to $9.3 million.

Full Year 2020 Compared to Full Year 2019

* Total revenue was $240.6 million, compared to $231.7 million, an increase of 3.8%. Business and wholesale revenue was $162.9 million, compared to $150.6 million, up 8.2%. Consumer revenue was $36.6 million, compared to $37.0 million, a decrease of 1.2%. Regulatory revenue was $41.1 million, compared to $44.1 million, a decrease of 6.7%. * Operating expenses were $228.7 million, including $9.6 million of transaction expenses, compared to $209.8 million. * Operating income was $11.9 million, compared to $21.9 million. * Net loss attributable to Alaska Communications was $1.1 million, compared to net income of $4.9 million. * Capital expenditures were $48.2 million, compared to $44.8 million, or excluding prefunded projects were $39.9 million, compared to $41.4 million. * Adjusted EBITDA was $64.1 million, compared to $62.7 million. * Adjusted Free Cash Flow was $14.4 million, compared to $16.0 million, or excluding prefunded projects was $15.3 million, compared to $10.4 million.

Balance Sheet Highlights

* Cash was $21.0 million at December 31, 2020, compared to $28.0 million at December 31, 2019. * Net debt was $151.9 million at December 31, 2020, compared to $153.8 million at December 31, 2019.

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 Chief Financial Officer, said, "In 2020, we delivered strong financial performance even with the impact of the COVID-19 pandemic. We exceeded revenue guidance, driven by increased broadband revenue, equipment sales and special project revenue coming online. Our business and wholesale growth offset our consumer and regulatory decreases, and our growth revenues continue to outpace our legacy declines. Regarding capex, due to the timing of certain projects, we were able to accelerate expansion of our fiber network and spent slightly more than guidance. Adjusted Free Cash Flow was on target, and even with incurring $7.2 million in payments associated with transaction costs in the fourth quarter, our cash balances remain strong. As a result, we are well positioned for 2021."

2020 Performance

Operating Statement ($ in M) 2020 Guidance 2020 Performance

Total Revenue $232 - $237 $240.6

Adjusted EBITDA $63 - $65 $64.1

Capital Expenditures $37 - $39 $39.9(excluding prefunded projects)

Adjusted Free Cash Flow $14 - $16 $15.3(excl. prefunded projects)

Transaction Update

On December 31, 2020, Alaska Communications and ATN International, Inc. (NASDAQ: ATNI) signed a definitive agreement under which the Company will become a consolidated, majority owned subsidiary of ATN. After the expiration of the Hart-Scott-Rodino antitrust waiting period, on March 12, 2021, Alaska Communications held a special shareholder meeting where the Company's shareholders approved the merger, pending certification of the vote results. The transaction is expected to close in the second half of 2021, subject to certain regulatory approvals and other conditions. Under the terms of the agreement, a subsidiary of ATN will acquire all the outstanding shares of Alaska Communications common stock for $3.40 per share in cash. Alaska Communications' prior agreement to be acquired by an affiliate of Macquarie Capital and GCM Grosvenor, through its Labor Impact Fund, L.P., was terminated on December 31, 2020. The company paid a termination fee of $6.8 million.

Conference Call

Due to the pending transaction, the Company will not hold a conference call.

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.

Revenue Category Definitions

Growth Revenues are defined as business broadband, managed IT services, equipment sales and installations, wholesale broadband and consumer broadband. Legacy Revenues are defined as business voice and other, Wholesale voice and other, consumer voice and other, and Access. CAF II Revenues are defined as high cost support.

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 $15.9 million in the twelve-month period of 2020).

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 changes in technology and related standards, the impacts of the COVID-19 pandemic on the economy of Alaska and on the Company, the impact of natural or man-made disasters and accidents, Federal and Alaska Universal Service Fund changes and our current and historical compliance with the obligations of those programs, structural declines for voice and other legacy services, maintenance or IT issues, third-party intellectual property claims, potential pension shortfalls, the success or failure of future strategic transactions, funding through the rural health care universal service support mechanism and our ability to comply and our history of compliance with the regulatory requirements to receive those support payments, our ability to service our debt and refinance as required, adverse economic conditions, our success in providing broadband services on the North Slope and Western Alaska, 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, 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, changes in Company's relationships with large customers, unforeseen changes in public policies, regulatory changes, 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,

2020 2019 2020 2019

Operating revenues $ 62,333 $ 58,262 $ 240,569 $ 231,694

Operating expenses:Cost of services and sales 30,316 26,847 112,443 105,615 (excluding depreciationand amortization)Selling, general & 17,610 14,512 65,773 66,718 administrativeTransaction and 9,550 - 9,550 - termination costsDepreciation and 10,560 9,851 40,667 37,276 amortizationLoss on disposal of 117 55 240 156 assets, net Total operating expenses 68,153 51,265 228,673 209,765

Operating (loss) income (5,820 ) 6,997 11,896 21,929

Other income and(expense):Interest expense (2,643 ) (2,910 ) (11,000 ) (12,059 )

Loss on extinguishment of - - - (2,830 )debtInterest income 18 94 174 385

Other income (expense), (8 ) (17 ) 439 175 netTotal other income and (2,633 ) (2,833 ) (10,387 ) (14,329 )(expense) (Loss) income before (8,453 ) 4,164 1,509 7,600 income tax benefit(expense) Income tax benefit 232 (1,537 ) (2,665 ) (2,765 )(expense)

Net (loss) income (8,221 ) 2,627 (1,156 ) 4,835

Less net loss attributable (19 ) (17 ) (83 ) (93 )to noncontrolling interest Net (loss) income $ (8,202 ) $ 2,644 $ (1,073 ) $ 4,928 attributable to AlaskaCommunications Net (loss) income pershare attributable toAlaska Communications:Net (loss) income $ (8,202 ) $ 2,644 $ (1,073 ) $ 4,928 applicable to commonshares Basic $ (0.15 ) $ 0.05 $ (0.02 ) $ 0.09

Diluted $ (0.15 ) $ 0.05 $ (0.02 ) $ 0.09

Weighted average sharesoutstanding:Basic 54,179 53,012 54,013 53,379

Diluted 54,179 53,975 54,013 54,277

Schedule 2

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.CONSOLIDATED BALANCE SHEETS(Unaudited, In Thousands Except Per Share Amounts) December 31, December 31,

Assets 2020 2019

Current assets:Cash and cash equivalents $ 19,644 $ 26,662

Restricted cash 1,326 1,331

Short-term investments 434 434

Accounts receivable, net of allowance of $4,060 41,893 34,354 and $4,627Materials and supplies 7,624 8,900

Prepayments and other current assets 6,404 9,617

Total current assets 77,325 81,298

Property, plant and equipment 1,452,943 1,424,904

Less: accumulated depreciation and amortization (1,062,027 ) (1,042,546 )

Property, plant and equipment, net 390,916 382,358

Operating lease right of use assets 89,821 80,991

Other assets 11,370 12,598

Total assets $ 569,432 $ 557,245

Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term obligations $ 9,067 $ 8,906

Accounts payable, accrued and other current 49,700 42,869 liabilitiesOperating lease liabilities - current 3,392 2,795

Total current liabilities 62,159 54,570

Long-term obligations, net of current portion 159,641 167,476

Deferred income taxes 5,846 4,403

Operating lease liabilities - noncurrent 81,103 78,767

Other long-term liabilities, net of current 94,764 78,520 portionTotal liabilities 403,513 383,736

Commitments and contingenciesAlaska Communications stockholders' equity:Common stock, $.01 par value; 145,000 authorized 549 541

Treasury stock, 1,000 shares at cost (1,812 ) (1,812 )

Additional paid in capital 163,317 161,844

Retained earnings 9,442 15,367

Accumulated other comprehensive loss (6,340 ) (3,277 )

Total Alaska Communications stockholders' equity 165,156 172,663

Noncontrolling interest 763 846

Total stockholders' equity 165,919 173,509

Total liabilities and stockholders' equity $ 569,432 $ 557,245

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,

2020 2019 2020 2019

Cash Flows fromOperating Activities: Net (loss) income $ (8,221 ) $ 2,627 $ (1,156 ) $ 4,835

Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and 10,560 9,851 40,667 37,276 amortization Loss on disposal of 117 55 240 156 assets, net Amortization of debt 292 304 1,234 1,215 issuance costs and debt discount Loss on extinguishment - - - 2,830 of debt Amortization of (1,789 ) (1,255 ) (6,670 ) (4,655 ) deferred capacity revenue Stock-based 475 814 1,693 1,580 compensation Deferred income tax (232 ) 1,385 2,658 2,919 (benefit) expense Charge for 739 (18 ) (216 ) 257 uncollectible accounts Amortization of ROU 825 572 2,897 2,288 assets Other non-cash expense 8 18 (91 ) 70 (income), net Changes in operating 3,459 1,842 15,863 10,044 assets and liabilities

Net cash provided by 6,233 16,195 57,119 58,815 operating activities Cash Flows fromInvesting Activities: Capital expenditures (15,303 ) (13,208 ) (48,243 ) (44,764 )

Capitalized interest (358 ) (396 ) (1,364 ) (1,379 )

Change in unsettled (981 ) 57 (579 ) 640 capital expenditures Proceeds on sale of - 5 - 25 assets Net cash used by (16,642 ) (13,542 ) (50,186 ) (45,478 ) investing activities Cash Flows fromFinancing Activities: Repayments of (2,267 ) (1,137 ) (8,908 ) (174,040 ) long-term debt Proceeds from the - - - 180,000 issuance of long-term debt Debt issuance costs - - - (2,683 ) and discounts Cash paid for debt - - - (1,252 ) extinguishment Payment of cash - - (4,836 ) - dividend on common stock Payment of withholding (17 ) (5 ) (456 ) (453 ) taxes on stock-based compensation Purchases of treasury - - - (1,812 ) stock Proceeds from issuance 120 105 244 211 of common stock Net cash used by (2,164 ) (1,037 ) (13,956 ) (29 ) financing activities Change in cash, cash (12,573 ) 1,616 (7,023 ) 13,308 equivalents andrestricted cash Cash, cash equivalents 33,543 26,377 27,993 14,685 and restricted cash,beginning of period Cash, cash equivalents $ 20,970 $ 27,993 $ 20,970 $ 27,993 and restricted cash,end of period Supplemental Cash FlowData: Interest paid $ 2,705 $ 2,992 $ 11,137 $ 12,228

Dividends payable at $ 16 $ - $ 16 $ - December 31, 2020 Income taxes paid, net $ (4,311 ) $ (5,051 ) $ (4,307 ) $ (5,041 )

Schedule 4ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.ADJUSTED EBITDA(Unaudited, In Thousands) Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Net (loss) income $ (8,221 ) $ 2,627 $ (1,156 ) $ 4,835

Add (subtract):Interest expense 2,643 2,910 11,000 12,059

Loss on extinguishment of - - - 2,830 debtInterest income (18 ) (94 ) (174 ) (385 )

Depreciation and 10,560 9,851 40,667 37,276 amortizationOther expense (income), net 8 17 (439 ) (175 )

Loss on disposal of assets, 117 55 240 156 netIncome tax (benefit) expense (232 ) 1,537 2,665 2,765

Stock-based compensation 475 814 1,693 1,580

Transaction-related costs 9,550 - 9,550 -

Cash severance expense - 120 - 1,715

Net loss attributable to 19 17 83 93 noncontrolling interest Adjusted EBITDA $ 14,901 $ 17,854 $ 64,129 $ 62,749

Non-GAAP 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 $15.9 million in the twelve-month period ended December 31, 2020).

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 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 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, transaction-related costs, cash severance expense, and net loss attributable to noncontrolling interest.

Schedule 5

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED FREECASH FLOW(Unaudited, In Thousands) Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Net cash provided by $ 6,233 $ 16,195 $ 57,119 $ 58,815 operating activities Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow: Capital expenditures (13,536 ) (9,981 ) (39,881 ) (41,355 ) excluding prefunded projects Capital expenditures (1,767 ) (3,227 ) (8,362 ) (3,409 ) for prefunded projects Milestone payments 2,615 3,785 16,895 9,070 received for prefunded projects Milestone payments made - - (8,250 ) - for prefunded projects Deferred cost of sales 175 - 525 - for prefunded projects Amortization of revenue (523 ) (113 ) (1,753 ) (113 ) for prefunded projects Amortization of 1,789 1,255 6,670 4,655 deferred capacity revenue Amortization of GCI (523 ) (522 ) (2,077 ) (2,071 ) capacity revenue Amortization of debt (292 ) (304 ) (1,234 ) (1,215 ) issuance costs and debt discount Interest expense 2,643 2,910 11,000 12,059

Interest paid (2,705 ) (2,992 ) (11,137 ) (12,228 )

Interest income (18 ) (94 ) (174 ) (385 )

Deferred income tax 232 (1,385 ) (2,658 ) (2,919 ) benefit (expense) Income tax (benefit) (232 ) 1,537 2,665 2,765 expense Income taxes paid, net 4,311 5,051 4,307 5,041

Charge for (739 ) 18 216 (257 ) uncollectible accounts Amortization of ROU (825 ) (572 ) (2,897 ) (2,288 ) assets Transaction-related 9,550 - 9,550 - costs Other expense (income), 8 17 (439 ) (175 ) net Net loss attributable 19 17 83 93 to noncontrolling interest Other non-cash (8 ) (18 ) 91 (70 ) (expense) income, net Changes in operating (3,459 ) (1,842 ) (15,863 ) (10,044 ) assets and liabilitiesAdjusted free cash flow $ 2,948 $ 9,735 $ 14,396 $ 15,969

Schedule 6ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.ADJUSTED FREE CASH FLOW(Unaudited, In Thousands) Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Adjusted EBITDA $ 14,901 $ 17,854 $ 64,129 $ 62,749

Less: Capital expenditures (13,536 ) (9,981 ) (39,881 ) (41,355 )excluding prefunded projectsAmortization of GCI (523 ) (522 ) (2,077 ) (2,071 )capacity revenueCash severance expense - (120 ) - (1,715 )

Income taxes paid, net 4,311 5,051 4,307 5,041

Interest paid (2,705 ) (2,992 ) (11,137 ) (12,228 )

2,448 9,290 15,341 10,421

Impact of prefunded projects:Capital expenditures for (1,767 ) (3,227 ) (8,362 ) (3,409 )prefunded projectsMilestone payments 2,615 3,785 16,895 9,070 received for prefunded projectsMilestone payments made - - (8,250 ) - for prefunded projectsDeferred cost of sales 175 - 525 - for prefunded projectsAmortization of revenue (523 ) (113 ) (1,753 ) (113 )for prefunded projects 500 445 (945 ) 5,548

Adjusted free cash flow* $ 2,948 $ 9,735 $ 14,396 $ 15,969

* 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.

Non-GAAP 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, cash income taxes refunded or paid, cash interest paid, amortization of GCI capacity revenue, cash severance expense for the Company's former Chief Executive Officer, 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. Amortization of deferred revenue associated with our interconnection agreement with GCI is excluded from Adjusted Free Cash Flow because no cash was received by the Company in connection with this agreement. Amortization of all other deferred revenue, including that associated with other IRU capacity arrangements, is included in Adjusted Free Cash Flow because cash was received by the Company, typically at contract inception, and is being recognized as revenue over the term of the relevant agreement.

See Schedule 3 for Net cash provided by operating activities, Net cash used by investing activities, and Net cash used by financing activities.

See Schedule 5 for the reconciliation of net cash provided by operating activities to Adjusted Free Cash Flow.

Schedule 7

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.REVENUE BY CUSTOMER GROUP(Unaudited, In Thousands) Three Months Ended Twelve Months Ended

December 31, December 31,

2020 2019 2020 2019

Business and wholesale revenueBusiness broadband $ 16,288 $ 15,427 $ 64,238 $ 61,785

Business voice and other 7,189 7,218 28,936 28,660

Managed IT services 1,148 1,529 5,052 6,494

Equipment sales and 4,800 1,868 9,508 4,698installationsWholesale broadband 12,456 11,321 49,878 43,310

Wholesale voice and other 1,282 929 5,256 5,617

Total business and wholesale 43,163 38,292 162,868 150,564revenueGrowth in business and 12.7 % 8.2 % wholesaleConsumer revenue Broadband 6,706 6,709 27,180 26,589

Voice and other 2,245 2,484 9,379 10,431

Total consumer revenue 8,951 9,193 36,559 37,020

Total business, wholesale, 52,114 47,485 199,427 187,584and consumer revenueGrowth in business, wholesale 9.7 % 6.3 % and consumer revenueGrowth in broadband revenue 6.0 % 7.3 %

Regulatory revenue Access 5,295 5,853 21,448 24,416

High cost support 4,924 4,924 19,694 19,694

Total regulatory revenue 10,219 10,777 41,142 44,110

Total revenue $ 62,333 $ 58,262 $ 240,569 $ 231,694

Growth in total revenue 7.0 % 3.8 %

Growth Revenues: Business broadband, Managed IT services, Equipment sales and installations, Wholesale broadband, and Consumer broadband

Legacy Revenues: Business voice and other, Wholesale voice and other, Consumer voice and other, and Access

CAF II Revenues: High Cost Support

Schedule 8

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.KEY OPERATING STATISTICS(Unaudited) Three Months Ended

December 31, September December 31, 30,

2020 2020 2019

Voice: Business access lines 65,294 66,253 68,242

Consumer access lines 20,578 21,229 22,829

Voice ARPU business $ 28.61 $ 27.98 $ 26.56

Voice ARPU consumer $ 34.77 $ 34.13 $ 33.90

Broadband: Business connections 14,652 14,672 14,880

Consumer connections 30,598 32,012 31,480

Broadband ARPU business $ 371.60 $ 364.04 $ 343.83

Broadband ARPU consumer $ 72.84 $ 72.41 $ 70.81

Monthly Average Churn: Business voice 0.4 % 0.9 % 0.7 %

Consumer broadband 1.5 % 3.0 % 2.9 %

Consumer voice 1.1 % 1.1 % 1.3 %

Schedule 9 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.LONG TERM DEBT AND NET DEBT(Unaudited, In Thousands)

December December 31, 31,

2020 2019

2019 senior secured credit facility due 2024 $ 168,896 $ 177,750

Debt discount - 2019 senior secured credit (1,523 ) (2,234 )facilities due 2024Debt issuance costs - 2019 senior secured credit (1,341 ) (1,863 )facilities due 2024Capital leases and other long-term obligations 2,676 2,729

Total debt 168,708 176,382

Less current portion (9,067 ) (8,906 )

Long-term obligations, net of current portion $ 159,641 $ 167,476

Total debt $ 168,708 $ 176,382

Plus debt discounts and debt issuance costs 2,864 4,097

Gross debt 171,572 180,479

Cash and cash equivalents (19,644 ) (26,662 )

Net debt $ 151,928 $ 153,817

View source version on businesswire.com: https://www.businesswire.com/news/home/20210315005216/en/

CONTACT: Media Contact Heather Cavanaugh, 907-564-7722 Director, External Affairs and Corporate Communications

CONTACT: Investor Contact Tiffany Smith, 907-564-7556 Manager, Board and Investor Relations investors@acsalaska.com