Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
The Alaskan telecommunications company enjoyed increasing sales during the quarter, but costs related to an acquisition hurt profits, and disappointing EBITDA guidance weighed on the shares.
Motley Fool Returns
Market-beating stocks from our flagship service.
Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 2025-08-28 19:30:07.740487.
Discounted offers are only available to new members. Stock Advisor list price is $199 per year.
Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Source: Ian D. Keating via Flickr
Alaskan telecommunications company General Communication (GNCMA +0.00%) reported its fourth quarter results on March 2. The company managed to grow revenue, but costs associated with its acquisition of a wireless business drove down profitability. Here's what investors need to know about the results.
The raw numbers
|
Q4 2015 |
Q4 2014 |
YoY Growth | |
|---|---|---|---|
|
Sales |
$241.3 million |
$228.8 million |
5.5% |
|
Adjusted EBITDA |
$70.5 million |
$70.7 million |
(0.2%) |
|
Net income |
($8.9 million) |
$5.8 million |
N/A |
What happened with General Communication this quarter?
The company operates both wireless and wireline businesses in Alaska:
General Communication also provided guidance for 2016.
What management had to say
A large portion of General Communication's wireless comes in the form of roaming and backhaul agreements, and the company gave an update on the impact of new long-term agreements. "These agreements will reduce the cash we receive from roaming and backhaul by approximately 20%, or $25 million, in 2016 when compared with 2015. Notwithstanding the negative cash impact to GCI in 2016, we believe these agreements are valuable to GCI and substantially mitigate a key risk factor in the business."
CEO Ron Duncan pointed to these new agreements as important for the long-term health of the company:
We finished 2015 on strong operational footing, which sets us up to capitalize on opportunities in 2016. Our broadband data products continue to provide core growth, and our new wireless roaming agreements secure an important revenue source for the long-term health of the company. We also anticipate selling our urban wireless towers in 2016, which will provide us additional capital that we intend to reinvest in the growth of our company. This sale will support significant investments in a diverse fiber to the North Slope and continued expansion of our TERRA network. These steps demonstrate GCI's commitment to being the leader in broadband infrastructure in Alaska.
Looking ahead
General Communication's adjusted EBITDA guidance for 2016 calls for a decline compared to 2015. This expected decline, as well as the expectation of a drop in revenue during 2016, is likely the reason why the stock declined significantly the day earnings were released.
The new long-term roaming contracts represent a trade-off for the company, providing a higher degree of visibility in exchange for lower payments. General Communications stated that the negative impact to adjusted EBITDA would be $25 million, which more than accounts for the discrepancy between the company's guidance for 2016 and its results from 2015. While investors may be disappointed by the guidance, the company clearly believes that these long-term contracts are the right choice.