2019 Annual Meeting May 29, 2019
Safe Harbor Statement Forward-Looking Statements We have included in this presentation 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. You 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 risks, uncertainties and other factors, many of which are outside Alaska Communications' control. For further information regarding risks and uncertainties associated with Alaska Communications' business, please refer to the Alaska Communications’ SEC filings, including, but not limited to, our annual report on Form 10 -K, quarterly reports on Form 10-Q filed subsequently, and other filings with the SEC, included under headings such as “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Non-GAAP Measures In an effort to provide investors with additional information regarding our financial results, in particular with regards to our liquidity and capital resources, we have disclosed certain non-GAAP financial information such as Adjusted EBITDA, Adjusted Free Cash Flow and Net Debt, which management utilizes to assess performance and believes provides useful information to investors. The definition of these non-GAAP measures are contained in our quarterly earnings press releases. Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP measures and should not be considered a substitute for Net Income, Net Cash Provided (Used) 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 our earnings releases. Other companies may not calculate non-GAAP measures in the same manner as Alaska Communications. We do not provide guidance for Net Income and Net Cash Provided (Used) By Operating Activities. 2 2 | Alaska Communications
ALSK Investment Thesis Robust Broadband Growth Favorable Competitive Dynamics High Quality Fiber Assets Technology Innovation Strategic Customer Relationships 3 | Alaska Communications
Robust Broadband Growth Video Streaming Internet video traffic growth at ~24% CAGR 2016-2021 Gaming, Augmented / Virtual Reality Online gaming traffic growth at ~62% CAGR 2016-2021 Cloud Migration Business IP traffic growth at ~23% CAGR 2016-2021 5G Wireless Backhaul Small cell deployment increase ~35x in next 10 years Distributed Content Delivery Networks Traffic crossing CDN’s growth at ~38% CAGR 2016 -2021 Sources: Cisco Visual Networking Index: Forecast and Methodology, 2016 – 2021, and Management estimates 4 | Alaska Communications
~$1.6B Opportunity in Alaska Offers Significant Runway for Growth Total Market: ~$1.6B Telecom Market: ~$820M All others: ALSK: $167M ~$203M 20% 25% IT TELECOM 50% 50% GCI $450M GCI: $450M 55% • ALSK has grown share in the Enterprise / Carrier market segments with significant growth opportunity ahead • Growth expected from growing the expanding broadband market and further share gain from our competitors • The ~$836M IT market, represents significant opportunity to grow via gaining share of wallet 5 | Alaska Communications
Favorable Competitive Landscape Alaska Market Dynamics ▪ One primary wireline competitor ▪ Broadband and technology key to managing operating costs for businesses Differentiators ▪ Own and operate 2 of 4 submarine cables, with only diverse exit from Alaska ▪ MEF Certification, BGP Non Transit Peering and CDNs capabilities, FWA, Certified secure cloud connectivity ▪ Brand: recognized for local, trustworthy, reliable customer service Opportunities for Growth ▪ Grow with market ▪ Take share ▪ Expand share of wallet 6 | Alaska Communications
High Quality Fiber Assets ▪ Extensive and expanding fiber footprint covering major business areas in Alaska ▪ Own and operate 2 of the 4 subsea fiber cables connecting Alaska to Oregon and Washington with capacity on a third Recent investments in Fixed Wireless and Satellite capabilities extend network capabilities 7 | Alaska Communications
Network Serves as a Differentiator State of Art Secure IP Network High Quality Fiber & Broadband Network − Juniper IP/Advanced Ethernet core – − 100G wavelengths in state backbone with statewide 2.0 Certified Ethernet services diverse routes − All major military bases on fiber − Widely deployed Metaswitch voice − Extending fiber footprint into NW Alaska application soft-switch network − N+1 design, multiple wire centers with with our partner − 865 fiber lit buildings increasing annually distributed core network design − Over 75% of all buildings in our markets incorporates redundancy − Provisioning automation increases accuracy with 50+ employees are within 500 feet of an ALSK splice point and decreases delivery intervals − Metro fiber density increasing with 3 rd − Standards based networking built to party small cell fiber builds industry standards such as MEF 2.0 to − Own and operate two diverse submarine ensure the broadest possible compatibility routes to the Lower 48, with capacity on for our customers − Track record of network peering other systems for back-up/protection − Fiber assets from relationship carrier in the relationships and Content Delivery Network Arctic (North / NW Alaska) integration brings our customers closer to − 25.3K submarine fiber miles (6.6K route the content and provides a superior user experience miles) and 106.5K terrestrial fiber miles (11.6K route miles) 8 | Alaska Communications
Technology Leadership and Innovation Select Partnerships Next Generation Products Network Innovation ▪ First SIP product ▪ Fixed Wireless (FiWi) (sub 6Ghz) implementation in Alaska: Access ‒ QoS Enabled, Secure, MEF ‒ CAF II and surrounding areas Certified IP Network ‒ Major metro markets in Alaska ▪ Hosted Voice over Internet: ▪ P2P mmWave for Fixed Wireless ‒ HDVoice, Unified Backhaul Communications, OTT self ▪ Extending satellite solutions install ‒ Low Earth Orbit, C-Band, Ku- ▪ Secure Cloud Enablement Band ‒ Only Microsoft Express Route ▪ Converging networking and Certified Provider in Alaska ‒ Only CyrusOne cloud with SD WAN InternetExchange Certified ▪ Firsts in the market: Provider in Alaska ‒ Metro Ethernet & MPLS ▪ Internet Now for Multi- ‒ Carrier Ethernet 2.0 certified Dwelling Units (MDU’s) – Instant services turn up, unlimited data ‒ Voice over Internet and SIP next generation products ▪ IT Marketplace to serve small ‒ Microsoft Express Route business with IT Services 9 | Alaska Communications
Strategic Customer Relationships C ARRIER / F ED O IL & G AS S TATE / L OCAL H EALTHCARE / E DUCATION S TRATEGIC C OMMERCIAL Kodiak Area Native Assoc. 10 | Alaska Communications
Top Line Performance Provides Support for Future EBITDA Growth Net Growth Increase of ~$30M - $32M $230-$235 ~29% $8-$10 Net Legacy Decline of ~$(16)M - $(18)M Legacy ~$4 ~9% CAF II $4.5 $219.8 ~$5 $5 $(4.9) 48% Legacy ~62% $1.0 $(5.4) Growth $12.0 52% $(7)-$(9) Growth Growth revenues expected to be ~62% of Total Revenue by YE 2019. Growth revenues expected to continue to increase, resulting in EBITDA expansion over time. Growth Revenues: Consumer broadband, Business broadband, Equipment Sales, Wholesale broadband and Managed IT Services Legacy Revenues: Consumer voice and other, Business voice and other, Wholesale voice and other, Access and High Cost Support CAF II Revenues: High Cost Support Impact of Rural Health Care 11 | Alaska Communications
Growth Revenue Performance Back on Track • Growth revenues expected to be ~62% of total revenues in 2019: • Tied to investments in fiber • Closer to ~71% of total revenues when combined with stable CAF II revenues • 2017 and 2018 growth revenue performance lower than norm: • Impacted by adjustments to Rural Health Care program changes • 2019 swings back to a meaningful step-up in growth revenues: • Comparable to prior years, driven by strength in various large enterprise and carrier customer verticals • Legacy revenues trend lines remain predictable: • Tied to legacy copper networks • Voice connections will continue to decline, revenue mitigated by pricing actions where sustainable • High Cost Support, aka CAF II, revenues flat through 2025 • Access revenues • Reduction in 2019 tied to program restructuring • Reverting to a more normal downward trajectory starting 2020 12 | Alaska Communications
Adj. EBITDA Expansion as Margin Contribution from Growth Revenue Outpaces Margin Decline from Legacy Revenue Return on Prior Year Success CapEx $15.5M $22.6M $19.9M 16% 14% ~39% $60-$62 $7-$9 $(4)-$(6) $(1)-$(3) Contribution Margin from Legacy Revenues Contribution Margin from SG&A and Adj. Contribution Margin from Growth Revenues Growth Revenues: Consumer broadband, Business broadband, Equipment Sales, Wholesale broadband and Managed IT Services Legacy Revenues: Consumer voice and other, Business voice and other, Wholesale voice and other, Access and High Cost Support 13 | Alaska Communications
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