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01/14 01:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several concerns: funding limitations, exit from video business, roaming revenue decline, fiber break, and competitive pressures from Starlink. Despite record OIBDA and reduced debt, uncertainties in regulatory funding and operational transitions present challenges. The Q&A highlights unclear acquisition strategies, adding to uncertainties. Overall, negative factors outweigh positives, suggesting a negative stock price reaction.
Consumer wireless subscribers 1% year-over-year growth, ending the quarter with 207,000 subscribers. Added 4,700 consumer wireless lines during the quarter.
Cable modem subscribers 3% decline year-over-year, ending the quarter with 154,500 subscribers. Lost 1,300 data subscribers during the quarter due to the elimination of the ACP program in 2024, a fiber break on a third-party network, Starlink competition, and wireless substitution.
OIBDA (Operating Income Before Depreciation and Amortization) Record last 12 months OIBDA of $405 million as of the second quarter. Growth attributed to strong upgrade cycles in schools and healthcare corporations, consumer wireless growth, and cost efficiencies.
Net debt Reduced by $86 million in the second quarter, bringing total leverage down to 2.3x as defined by the credit agreement.
Total revenue $261 million in the second quarter, representing 6% growth year-over-year. Growth driven by strong upgrade cycles in schools and healthcare corporations, consumer wireless growth, and cost efficiencies.
Adjusted OIBDA $108 million in the second quarter, a 26% increase year-over-year. Growth driven by upgrade cycles in schools and healthcare corporations, consumer wireless growth, and cost efficiencies.
Consumer revenue Declined 2% to $119 million. Decline driven by decreases in data revenue and the video segment, slightly offset by growth in consumer wireless.
Consumer wireless revenue Increased 6% to $51 million, benefiting from wireless subscriber growth and an increase in federal wireless subsidies.
Business revenue Grew 14% to $142 million, driven by data revenue growth from upgrade cycles in schools and healthcare corporations. Wireless revenue declined $2 million or 17%, largely due to a decline in roaming revenue.
Business gross margin Increased to 81.7%, primarily due to temporary cost savings from the Quintillion fiber break and data revenue growth.
Capital expenditures (CapEx) Net of grant proceeds totaled $51 million during the quarter. Year-to-date net CapEx investment was approximately $100 million, with full-year net CapEx expected to be around $250 million.
Free cash flow $153 million on a trailing 12-month basis through the end of the second quarter. Growth attributed to favorable cash flow timing from USF cash receipts.
2.5 gigabit broadband connectivity: Offering in areas with fiber middle mile, covering majority of customers. Upgrading broadband network in Anchorage to DOCSIS 4.0 capable, enabling speeds up to 5 gigabits and beyond.
Unlimited test drive promotion: Launched in April 2025, offering discounted unlimited broadband and wireless line for broadband customers. Driving growth in GCI+ converged product and postpaid wireless lines.
Rural expansion in Alaska: Focused on bridging the digital divide with rural expansion. Universal Service Fund ruling supports this effort. Alaska Connect Fund and BEAD program funding to aid 5G wireless deployment and infrastructure projects.
Cost structure management: Proactively managing costs for 1.5 years. Reorganized tech organization and hired first-ever CTO to improve efficiency. Streamlining business and implementing new systems.
Exiting video business: Plan to fully exit video business by end of 2025 to focus on core products and services.
Spin-off from Liberty Broadband: Completed spin-off in July 2025, becoming a standalone public company.
Alaska economic outlook: Potential for economic growth with natural gas pipeline and AI economy opportunities. Optimism due to Japan's investment in Alaska gas.
Decline in Data Subscribers: The company experienced a 3% year-over-year decline in data subscribers, losing 1,300 data subscribers during the quarter. This was attributed to the elimination of the ACP program in 2024, a fiber break on a third-party network, competition from Starlink, and wireless substitution.
Economic Challenges in Alaska: The Alaskan economy has been flat with a declining workforce for over a decade. The state government faces challenges due to the lack of a credible fiscal plan, and the drop in oil prices has contributed to economic stagnation.
BEAD Program Funding Limitations: Recent changes to the BEAD program make it unlikely that the state of Alaska will be able to award the full $992 million allocated for infrastructure projects, potentially impacting GCI's ability to defray capital costs for expansion in unserved locations.
Exit from Video Business: GCI plans to fully exit the video business by the end of the year. While this will allow the company to focus on other products, it may result in some operational adjustments and customer transitions.
Roaming Revenue Decline: Business wireless revenue declined by 17%, largely driven by a decrease in roaming revenue, which could impact overall business revenue growth.
Fiber Break on Third-Party Network: A fiber break on a third-party network used by GCI has disrupted services, contributing to the decline in data subscribers and potentially affecting customer satisfaction.
Competitive Pressures from Starlink: Competition from Starlink has been identified as a factor in the decline of data subscribers, posing a challenge to GCI's market share in broadband services.
Regulatory and Funding Uncertainty: While the Supreme Court's decision on the Universal Service Fund was favorable, ongoing regulatory and funding uncertainties, such as those related to the Alaska Connect Fund and BEAD program, could impact GCI's strategic plans and financials.
Broadband Network Upgrades: GCI is in the process of upgrading its broadband network in Anchorage, including reducing node sizes and upgrading the plant to 1.8 gigahertz. The upgrades are DOCSIS 4.0 capable, enabling speeds of up to 5 gigabits and beyond. These upgrades will be rolled out to other markets in the coming years.
Wireless Growth and 5G Expansion: GCI plans to roll out new pricing and packaging offers later this year to drive growth in wireless products. The company aims to provide 5G wireless service to all Alaskans over the coming years.
Rural Expansion and Alaska Plan: GCI expects to complete the first phase of the Alaska Plan and meet build-out requirements by 2026, increasing wireless speeds in rural communities. The FCC's Alaska Connect Fund will extend the Alaska Plan and aid in 5G deployment.
BEAD Program Participation: GCI has submitted applications for the Alaska BEAD program, which could defray capital costs for expanding in unserved locations. However, this funding is not currently factored into CapEx budgeting.
Cost Efficiency Initiatives: GCI is continuing efforts to streamline its business and increase efficiency, including implementing new systems and applying lessons learned from the CTO reorganization to other parts of the company.
Capital Expenditures: GCI expects full-year net CapEx to be around $250 million for 2025.
Free Cash Flow Outlook: The outlook for the rest of 2025 is favorable, with expected acceleration in cash flows due to USAC approval for a significant amount of services.
Dividend Payment: The GCI Liberty nonvoting preferred stock pays a 12% dividend with a redemption date in 2032.
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