Alaska Communications Systems Group, Inc. :ALSK-US: Earnings Analysis: Q4, 2016 By the Numbers : March 21, 2017

Alaska Communications Systems Group, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of Alaska Communications Systems Group, Inc. – Consolidated Communications Holdings, Inc., Cincinnati Bell Inc., General Communication, Inc. Class A, CenturyLink, Inc., AT&T Inc. and Verizon Communications Inc. (CNSL-US, CBB-US, GNCMA-US, CTL-US, T-US and VZ-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 57.79 million, Net Earnings of USD 1.63 million.
  • Gross margins widened from 39.11% to 41.42% compared to the same period last year, operating (EBITDA) margins now 26.90% from 23.16%.
  • Year-on-year change in operating cash flow of 1.54% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 57.79 56.48 56.26 56.33 56.63
Revenue Growth (%YOY) 2.05 3.19 1.07 -14.38 -26.94
Earnings (mil) 1.63 0.35 0.32 0.09 0.34
Earnings Growth (%YOY) 380.53 -71.43 106.55 -99.47 106.33
Net Margin (%) 2.82 0.63 0.56 0.15 0.6
EPS 0.03 0.01 0.01 0 0.01
Return on Equity (%) 4.13 0.91 0.82 0.22 0.88
Return on Assets (%) 1.39 0.32 0.28 0.07 0.28

Access our Ratings and Scores for Alaska Communications Systems Group, Inc.

Market Share Versus Profits

Revenues History
Earnings History

ALSK-US‘s change in revenue this period compared to the same period last year of 2.05% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ALSK-US is holding onto its market share. Also, for comparison purposes, revenues changed by 2.32% and earnings by 360.17% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 39.11% to 41.42% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 23.16% to 26.90% compared to the same period last year. For comparison, gross margins were 39.56% and EBITDA margins were 22.98% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ALSK-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 19.21 days from 36.02 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ALSK-US‘s change in operating cash flow of 1.54% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 8.37% to 11.71% and (2) one-time items. The company’s pretax margins are now 4.98% compared to 0.96% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Alaska Communications Systems Group, Inc.

Company Profile

Alaska Communications Systems Group, Inc. provides telecommunications and network services to consumer, business and enterprise customers in the state of Alaska. It provides communications and managed services including voice and broadband data network hosting, information technology management, cloud-based services, billing and collection, and local and long distance services to business and wholesale customers; broadband, Internet access, local and long distance voice, and other communications products and services to residential customers; wireless voice and broadband services, and other value-added wireless products and services, such as wireless devices, across Alaska with roaming coverage available in the contiguous states, Hawaii and Canada; voice and broadband termination services to inter and intrastate carriers who provide services to its retail customers. The company was founded by James H. Huesgen and Wayne P. Graham in October 1998 and is headquartered in Anchorage, AK.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of ALSK-US.