ATN International, Inc. (NASDAQ:ATNI) Q3 2021 Earnings Conference Call October 28, 2021 10:00 AM ET Company Participants Justin Benincasa - Chief Financial Officer Michael Prior - Chief Executive Officer Conference Call Participants Richard Prentiss - Raymond James Greg Burns - Sidoti & Company Hamed Khorsand - BWS Operator Good day and thank you for standing by. Welcome to the ATN International Third Quarter 2021 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode ...

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q) This section provides essential filing details for the Form 10-Q, identifying the company and report period [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This section provides basic Form 10-Q filing information for ATN International, Inc., a large accelerated filer, for Q2 2021 - The report is a Quarterly Report on Form 10-Q for the period ended June 30, 2021[2](index=2&type=chunk) - ATN International, Inc. is incorporated in Delaware, with its principal executive offices in Beverly, Massachusetts[3](index=3&type=chunk) - The registrant is a large accelerated filer and has filed all required reports and interactive data files during the preceding 12 months[3](index=3&type=chunk) Form 10-Q Metrics | Metric | Value | | :--- | :--- | | Commission File Number | 001-12593 | | Trading Symbol | ATNI | | Exchange | The Nasdaq Stock Market LLC | | Common Stock Outstanding (as of Aug 9, 2021) | 15,864,072 shares | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) This section outlines the Form 10-Q's structure, divided into Part I (Financial Information) and Part II (Other Information) [Report Structure](index=2&type=section&id=Report%20Structure) The Table of Contents outlines the Form 10-Q's structure, detailing financial statements and other information - The report is structured into two main parts: Part I – Financial Information and Part II – Other Information[6](index=6&type=chunk)[7](index=7&type=chunk) - Part I includes Unaudited Condensed Consolidated Financial Statements (Balance Sheets, Statements of Operations, Comprehensive Income, Equity, Cash Flows) and Notes, Management's Discussion and Analysis, Market Risk Disclosures, and Controls and Procedures[6](index=6&type=chunk)[7](index=7&type=chunk) - Part II covers Legal Proceedings, Risk Factors, Unregistered Sales of Equity Securities, Other Information, and Exhibits[7](index=7&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD%20LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to risks, with no obligation to update [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section advises that the report contains forward-looking statements about future performance, subject to risks and uncertainties - The report contains forward-looking statements regarding future financial performance, results of operations, competitive environment, demand for services, industry trends, and management's plans and strategy[9](index=9&type=chunk) - Actual future events and results could differ materially due to factors such as operational performance, integration of acquisitions (e.g., Alaska Communications), roaming arrangements, network upgrades, government regulation, supplier reliance, economic risks (including the pandemic), personnel retention, investment opportunities, weather events, increased competition, network capacity, and access to capital[9](index=9&type=chunk) - The Company undertakes no obligation to update these forward-looking statements, except as required by law[9](index=9&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1 Unaudited Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents ATN International, Inc.'s unaudited condensed consolidated financial statements for Q2 2021 and 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and equity slightly decreased from December 2020 to June 2021, mainly due to reduced current assets Balance Sheet Metrics (in thousands) | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Assets | $1,066,574 | $1,083,711 | $(17,137) | -1.6% | | Total Liabilities | $325,388 | $329,375 | $(3,987) | -1.2% | | Total Equity | $741,186 | $754,336 | $(13,150) | -1.7% | | Cash and cash equivalents | $94,885 | $103,925 | $(9,040) | -8.7% | | Assets held for sale | $— | $34,735 | $(34,735) | -100.0% | | Customer receivable - long term | $28,333 | $9,614 | $18,719 | 194.7% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2021 revenue increased, but operating and net income significantly decreased due to higher operating expenses Statements of Operations (in thousands) - 3 Months Ended June 30 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $123,865 | $109,098 | $14,767 | 13.5% | | Income from Operations | $2,905 | $7,024 | $(4,119) | -58.6% | | Net Income | $3,290 | $8,364 | $(5,074) | -60.7% | | Net Income Attributable to ATN International, Inc. Stockholders | $2,019 | $4,746 | $(2,727) | -57.5% | | Basic EPS | $0.13 | $0.30 | $(0.17) | -56.7% | | Diluted EPS | $0.13 | $0.30 | $(0.17) | -56.7% | | Dividends Per Share | $0.17 | $0.17 | $0 | 0.0% | Statements of Operations (in thousands) - 6 Months Ended June 30 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $248,375 | $220,004 | $28,371 | 12.9% | | Income from Operations | $6,254 | $14,324 | $(8,070) | -56.3% | | Net Income | $7,565 | $10,742 | $(3,177) | -29.6% | | Net Income Attributable to ATN International, Inc. Stockholders | $4,723 | $3,733 | $990 | 26.5% | | Basic EPS | $0.30 | $0.23 | $0.07 | 30.4% | | Diluted EPS | $0.30 | $0.23 | $0.07 | 30.4% | | Dividends Per Share | $0.34 | $0.34 | $0 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income attributable to ATN International, Inc. decreased for Q2 2021 but increased for H1, influenced by net income and currency Statements of Comprehensive Income (Loss) (in thousands) - 3 Months Ended June 30 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Income | $3,290 | $8,364 | $(5,074) | -60.7% | | Foreign currency translation adjustment | $(370) | $1,782 | $(2,152) | -120.8% | | Comprehensive Income Attributable to ATN International, Inc. | $1,678 | $6,536 | $(4,858) | -74.3% | Statements of Comprehensive Income (Loss) (in thousands) - 6 Months Ended June 30 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Income | $7,565 | $10,742 | $(3,177) | -29.6% | | Foreign currency translation adjustment | $(410) | $(2,644) | $2,234 | -84.5% | | Comprehensive Income Attributable to ATN International, Inc. | $4,373 | $921 | $3,452 | 374.8% | [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Total equity decreased for the six months ended June 30, 2021, primarily due to share repurchases and dividends Total Equity (in thousands) | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Total ATNI Stockholders' Equity | $641,926 | $645,649 | $(3,723) | | Non-controlling Interests | $99,260 | $108,687 | $(9,427) | | Total Equity | $741,186 | $754,336 | $(13,150) | - Key activities impacting equity for the six months ended June 30, 2021 include: purchase of **81,406 shares of common stock for $3.9 million**, stock-based compensation of **$3.4 million**, dividends declared of **$5.4 million**, and repurchase of non-controlling interests of **$12.7 million**[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased for the six months ended June 30, 2021, leading to a net decrease in cash and equivalents Cash Flow Metrics (in thousands) - 6 Months Ended June 30 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $27,460 | $40,375 | $(12,915) | | Net cash used in investing activities | $(25,285) | $(54,733) | $29,448 | | Net cash used in financing activities | $(11,215) | $(22,012) | $10,797 | | Net change in cash, cash equivalents, and restricted cash | $(9,040) | $(36,488) | $27,448 | | Total cash, cash equivalents, and restricted cash, end of period | $95,957 | $125,870 | $(29,913) | - The decrease in operating cash flow was primarily due to lower net income and changes in working capital, particularly customer receivables[22](index=22&type=chunk) - Investing activities saw a significant decrease in cash used, driven by proceeds from the divestiture of businesses (**$18.6 million**) and government grants (**$3.3 million**), partially offset by increased capital expenditures[22](index=22&type=chunk)[284](index=284&type=chunk) - Financing activities used less cash, mainly due to proceeds from the customer receivable credit facility (**$17.6 million**) and reduced distributions to non-controlling interests, partially offset by increased repurchases of non-controlling interests[22](index=22&type=chunk)[285](index=285&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, covering accounting policies and key financial areas [1. Organization and Business Operations](index=10&type=section&id=1.%20Organization%20and%20Business%20Operations) ATN International, Inc. operates as a platform for communications and technology in smaller markets, providing infrastructure solutions - The Company aims to be a leading platform for operating and investing in smaller and specialty market communications services and technology companies[25](index=25&type=chunk)[153](index=153&type=chunk) - It provides facilities-based communications services and IT solutions in the United States, Bermuda, and the Caribbean, with a focus on rural and underserved markets[25](index=25&type=chunk)[153](index=153&type=chunk) - The Company has three operating segments: International Telecom (fixed data, internet, voice, mobility, video, managed services, carrier services in Bermuda, Cayman Islands, Guyana, US Virgin Islands), US Telecom (carrier services, fixed, mobility, managed services, private network services in the US Southwest), and Renewable Energy (distributed generation solar power in India, sold in January 2021)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) - The Company oversees capital allocation, provides shared service functions (billing, network, engineering, customer service), and offers management, technical, financial, regulatory, and marketing services to its subsidiaries[26](index=26&type=chunk)[27](index=27&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [COVID-19 Impact](index=12&type=section&id=COVID-19%20Impact) The company found no material adverse COVID-19 impact in Q2 2021, with increased revenue in both International and US Telecom segments - No material adverse impact from COVID-19 was identified on consolidated financial statements for the three and six months ended June 30, 2021[36](index=36&type=chunk)[165](index=165&type=chunk) - International Telecom segment experienced increased Mobility, Fixed, and Carrier Services revenue due to lifted pandemic restrictions and increased tourism[35](index=35&type=chunk)[163](index=163&type=chunk) - US Telecom segment saw increased revenue from rural broadband services, driven by demand for remote working and connectivity[35](index=35&type=chunk)[163](index=163&type=chunk) - Future assessments could result in material adverse impacts if COVID-19 travel or stay-at-home restrictions are reinstated, affecting tourism-dependent markets and equipment procurement[36](index=36&type=chunk)[165](index=165&type=chunk) [2. Basis of Presentation](index=12&type=section&id=2.%20BASIS%20OF%20PRESENTATION) This note clarifies consolidation principles, revenue/expense presentation, and new accounting pronouncements - The condensed consolidated financial statements include the Company, its controlling subsidiaries, and certain variable interest entities where the Company is the primary beneficiary[38](index=38&type=chunk) - Effective January 1, 2020, revenue presentation changed from 'wireless' and 'wireline' to 'Mobility,' 'Fixed,' and 'Carrier Services' within segment information, and 'Managed Services,' 'Renewable Energy,' and 'Construction' are now included in 'Other revenue'[39](index=39&type=chunk) - Effective January 1, 2021, operating expenses presentation changed by combining 'Termination and Access Fees' with 'Engineering and Operations' into 'Cost of Services,' and 'Sales, Marketing and Customer Service' with 'General and Administrative' into 'Selling, general and administrative expenses'[40](index=40&type=chunk) - The Company adopted ASU 2016-13 (Credit Losses) on January 1, 2020, using the modified retrospective approach, and new guidance simplifying income tax accounting in 2021 prospectively, neither of which had a material impact on consolidated financial statements[41](index=41&type=chunk)[42](index=42&type=chunk) [3. Revenue Recognition and Receivables](index=13&type=section&id=3.%20REVENUE%20RECOGNITION%20AND%20RECEIVABLES) This note details revenue recognition, contract assets/liabilities, performance obligations, and ASU 2016-13 impact on receivables - Contract assets represent unbilled amounts from multiyear retail wireless contracts where revenue recognized exceeds billing, while contract liabilities consist of advance payments and billings in excess of recognized revenue[43](index=43&type=chunk)[45](index=45&type=chunk) - The FirstNet Agreement involves building a portion of AT&T's network, with transaction price allocated to construction and service performance obligations based on standalone selling price[46](index=46&type=chunk) Contract Items (in thousands) | Contract Item (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Contract asset – current | $3,536 | $2,478 | $1,058 | 43% | | Contract asset – noncurrent | $916 | $910 | $6 | 1% | | Contract liability – current | $(15,332) | $(18,544) | $3,212 | 17% | | Contract liability – noncurrent | $(2,125) | $(2,193) | $68 | 3% | | Net contract liability | $(13,005) | $(17,349) | $4,344 | 25% | - Remaining performance obligations were **$249 million** at June 30, 2021, down from **$299 million** at December 31, 2020, with approximately **60%** expected to be satisfied within 24 months[52](index=52&type=chunk) - The Company adopted ASU 2016-13, requiring a forward-looking expected loss model for credit losses, which did not significantly impact operating results[54](index=54&type=chunk)[55](index=55&type=chunk) Receivable Items (in thousands) | Receivable Item (in thousands) | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Gross accounts receivable | $86,600 | $67,100 | | Allowance for credit losses | $13,500 | $12,100 | | FirstNet Agreement receivable (current) | $4,100 | $1,200 | | FirstNet Agreement receivable (long-term) | $28,300 | $9,600 | [4. Leases](index=16&type=section&id=4.%20LEASES) The company holds operating and financing leases for various assets, with stable operating lease costs and slightly increased finance lease costs - The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity, with terms typically 3 to 10 years[59](index=59&type=chunk) Lease Costs (in thousands) | Lease Cost (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total operating lease cost | $5,993 | $6,298 | $11,690 | $11,690 | | Total finance lease cost | $812 | $708 | $1,582 | $1,552 | Lease Metrics | Lease Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Weighted-average remaining operating lease term | 5.7 years | 5.9 years | | Weighted-average remaining financing lease term | 10.5 years | 10.9 years | | Weighted-average operating lease discount rate | 4.8% | 5.0% | | Weighted-average financing lease discount rate | 4.3% | 3.3% | - Maturities of operating lease liabilities totaled **$62.1 million** and financing lease liabilities totaled **$2.1 million** as of June 30, 2021[65](index=65&type=chunk) [5. Use of Estimates](index=17&type=section&id=5.%20USE%20OF%20ESTIMATES) Financial statement preparation requires significant management estimates and assumptions, which may differ from actual results - Significant estimates include allowance for credit losses, useful lives of fixed and finite-lived intangible assets, allocation of purchase price in business combinations, fair value of indefinite-lived intangible assets and goodwill, asset impairment, revenue, and income taxes[67](index=67&type=chunk)[69](index=69&type=chunk) - Actual results could differ significantly from these estimates[69](index=69&type=chunk) [6. Acquisitions and Dispositions](index=18&type=section&id=6.%20ACQUISITIONS%20AND%20DISPOSITIONS) This note covers the post-period acquisition of Alaska Communications and the January 2021 disposition of the International Solar Business - The Company completed the acquisition of Alaska Communications Systems Group, Inc. for approximately **$340 million** on July 22, 2021, to enter a new market[70](index=70&type=chunk)[145](index=145&type=chunk) - In January 2021, the Company sold **67%** of its distributed generation solar power projects in India (Vibrant Transaction), resulting in a **$21.5 million loss on sale in 2020** and an additional **$0.7 million loss in Q2 2021**[70](index=70&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) - Post-Vibrant Transaction, the Company's remaining **33% ownership** in Vibrant is accounted for using the equity method, with its results recorded in the Corporate and Other operating segment[70](index=70&type=chunk)[71](index=71&type=chunk)[75](index=75&type=chunk) - The Vibrant Transaction did not qualify as discontinued operations as it was not a strategic shift with a major effect on the Company's operations[75](index=75&type=chunk) [7. Fair Value Measurements and Investments](index=19&type=section&id=7.%20FAIR%20VALUE%20MEASUREMENTS%20AND%20INVESTMENTS) This note outlines the fair value hierarchy and details the valuation of investments, noting a decrease in Level 3 other investments - The Company uses a fair value hierarchy (Level 1, 2, 3) based on observable and unobservable inputs[76](index=76&type=chunk)[77](index=77&type=chunk) Assets and Liabilities Measured at Fair Value (in thousands) | Asset/Liability (in thousands) | Level 1 | Level 2 | Level 3 | Total (June 30, 2021) | | :--- | :--- | :--- | :--- | :--- | | Certificates of deposit | $— | $380 | $— | $380 | | Money market funds | $3,134 | $— | $— | $3,134 | | Other investments | $— | $— | $2,016 | $2,016 | | Interest rate swap | $— | $(97) | $— | $(97) | | Total assets and liabilities measured at fair value | $3,134 | $283 | $2,016 | $5,433 | - Other investments measured using Level 3 inputs decreased by **$11.3 million** during the six months ended June 30, 2021, primarily due to the conversion of an **$11.0 million convertible debt instrument** to equity, now accounted for under the cost method[79](index=79&type=chunk)[84](index=84&type=chunk) - Equity method investments include a privately held company (carrying value **$16.6 million** at June 30, 2021) and the remaining **33% interest** in former India solar operations (carrying value **$12.9 million** at June 30, 2021)[86](index=86&type=chunk)[87](index=87&type=chunk) - The fair value of long-term debt and the customer receivable credit facility was **$88.6 million** (book value **$87.7 million**) at June 30, 2021, estimated using Level 2 inputs[88](index=88&type=chunk) [8. Long-Term Debt](index=21&type=section&id=8.%20LONG-TERM%20DEBT) This note details the company's long-term debt facilities, including CoBank, FirstNet, Viya, and One Communications, with covenant compliance - The 2019 CoBank Credit Facility is a **$200 million** revolving credit facility maturing April 10, 2024, with **$184.0 million available** as of June 30, 2021 (net of **$16.0 million letters of credit**)[89](index=89&type=chunk)[93](index=93&type=chunk) - The FirstNet Receivables Credit Facility provides up to **$75.0 million** senior secured delayed draw term loan to finance AT&T receivables under the FirstNet Agreement, with **$17.2 million outstanding** and **$57.4 million available** as of June 30, 2021[94](index=94&type=chunk)[97](index=97&type=chunk) - The Viya Debt is a **$60.0 million** loan agreement with RTFC, maturing July 1, 2026, bearing a fixed interest rate of **4.0% per annum**, with **$60.0 million outstanding** as of June 30, 2021[98](index=98&type=chunk)[103](index=103&type=chunk) - The One Communications Debt is an outstanding loan from HSBC Bank Bermuda Limited, maturing May 22, 2022, with **$11.6 million outstanding** as of June 30, 2021[98](index=98&type=chunk)[104](index=104&type=chunk) - The Company was in compliance with all financial covenants for its debt facilities as of June 30, 2021[93](index=93&type=chunk)[98](index=98&type=chunk) [9. Government Grants](index=24&type=section&id=9.%20GOVERNMENT%20GRANTS) The company participates in various government grant programs (USF, CAF II, CARES Act, Tribal Bidding Credit) for telecom funding - The Company participates in the Federal Universal Service Fund (USF) programs, including High Cost, Lifeline, E-Rate, and Rural Health Care Support[99](index=99&type=chunk)[104](index=104&type=chunk) USF Program Revenue (in thousands) | USF Program Revenue (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | High Cost Program (International Telecom) | $4,300 | $4,100 | $8,400 | $8,200 | | High Cost Program (US Telecom) | $300 | $300 | $600 | $600 | | Connect America Fund Phase II | $1,900 | $1,900 | $3,800 | $3,800 | | E-Rate, Lifeline, Rural Health Care Support (aggregate) | $1,800 | $2,200 | $3,900 | $4,400 | - Viya's USF High Cost Program support will be reduced over two years following the Connect USVI Fund award, eventually ceasing[100](index=100&type=chunk) - The Company received **$18.7 million** in CARES Act funding, with **$18.4 million** reducing property, plant and equipment and **$0.3 million** reducing operating expense for network infrastructure construction in US Telecom[107](index=107&type=chunk) - A **$7.4 million Tribal Bidding Credit** is being used to offset network capital costs (**$6.1 million**) and network support costs (**$1.3 million**), with **$0.6 million offset in Q2 2021**[108](index=108&type=chunk) - The Company was a winning bidder for **$20.4 million** in CBRS Priority Access Licenses (PALs) in 2020 and expects to receive approximately **$20.1 million over 10 years** from the RDOF Phase I Auction[109](index=109&type=chunk)[110](index=110&type=chunk) [10. Retirement Plans](index=26&type=section&id=10.%20RETREMENT%20PLANS) The company maintains defined benefit pension and postretirement plans for International Telecom employees, with H1 2021 pension expense showing a benefit - The Company has noncontributory defined benefit pension and postretirement benefit plans for eligible employees in its International Telecom segment[112](index=112&type=chunk) Net Periodic Benefit Cost (in thousands) | Net Periodic Benefit Cost (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net periodic pension expense (benefit) | $(61) | $137 | $(122) | $274 | | Net periodic postretirement benefits expense | $76 | $62 | $152 | $124 | - The Company was not required to make contributions to its pension plans during the six months ended June 30, 2021, but contributed **$0.7 million** in the same period of 2020[115](index=115&type=chunk) [11. Income Taxes](index=26&type=section&id=11.%20INCOME%20TAXES) The effective tax rate for Q2 and H1 2021 was negative, influenced by income mix across jurisdictions and discrete items Effective Tax Rate | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Effective Tax Rate | (88.2%) | (37.0%) | (19.7%) | (12.0%) | - For the three months ended June 30, 2021, the effective tax rate was impacted by a **$3.4 million benefit** from the reversal of an unrecognized tax position and a **$0.5 million expense** for interest on unrecognized tax positions[116](index=116&type=chunk) - For the six months ended June 30, 2021, the effective tax rate was impacted by a **$3.4 million benefit** from the reversal of an unrecognized tax position and a **$1.0 million expense** for interest on unrecognized tax positions[119](index=119&type=chunk) - The effective tax rate is sensitive to the mix of income generated among different jurisdictions and transactional or one-time items[121](index=121&type=chunk)[235](index=235&type=chunk)[273](index=273&type=chunk) [12. Net Income Per Share](index=27&type=section&id=12.%20NET%20INCOME%20PER%20SHARE) Basic and diluted net income per share for Q2 2021 decreased to $0.13, while for H1 2021, it increased to $0.30 Net Income Per Share and Shares Outstanding | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Basic Net Income Per Share | $0.13 | $0.30 | $0.30 | $0.23 | | Diluted Net Income Per Share | $0.13 | $0.30 | $0.30 | $0.23 | | Weighted Average Common Shares Outstanding (Basic, in thousands) | 15,912 | 15,970 | 15,907 | 15,958 | | Weighted Average Common Shares Outstanding (Diluted, in thousands) | 15,921 | 16,004 | 15,930 | 15,993 | - **5,000 shares** relating to stock options were excluded from basic and diluted weighted average shares outstanding calculations for both periods as their effects were anti-dilutive[122](index=122&type=chunk) [13. Segment Reporting](index=28&type=section&id=13.%20SEGMENT%20REPORTING) This note provides disaggregated financial information for the International Telecom, US Telecom, and Renewable Energy segments - The Company operates through three reportable segments: International Telecom, US Telecom, and Renewable Energy[124](index=124&type=chunk) Revenue by Segment (in thousands) - 3 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $86,218 | $80,064 | $6,154 | 7.7% | | US Telecom | $37,647 | $28,160 | $9,487 | 33.7% | | Renewable Energy | $— | $874 | $(874) | -100.0% | | Consolidated Total | $123,865 | $109,098 | $14,767 | 13.5% | Operating Income (Loss) by Segment (in thousands) - 3 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $14,643 | $14,617 | $26 | 0.2% | | US Telecom | $(556) | $1,826 | $(2,382) | -130.4% | | Renewable Energy | $(771) | $(620) | $(151) | -24.4% | | Corporate and Other | $(10,411) | $(8,799) | $(1,612) | 18.3% | | Consolidated Total | $2,905 | $7,024 | $(4,119) | -58.6% | Revenue by Segment (in thousands) - 6 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $170,036 | $162,349 | $7,687 | 4.7% | | US Telecom | $77,921 | $55,459 | $22,462 | 40.5% | | Renewable Energy | $418 | $2,196 | $(1,778) | -81.0% | | Consolidated Total | $248,375 | $220,004 | $28,371 | 12.9% | Operating Income (Loss) by Segment (in thousands) - 6 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $27,786 | $28,005 | $(219) | -0.8% | | US Telecom | $(1,090) | $4,019 | $(5,109) | -127.1% | | Renewable Energy | $(1,433) | $(1,077) | $(356) | 33.1% | | Corporate and Other | $(19,009) | $(16,623) | $(2,386) | 14.3% | | Consolidated Total | $6,254 | $14,324 | $(8,070) | -56.3% | Total Assets by Segment (in thousands) | Segment | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | International Telecom | $640,162 | $642,834 | | US Telecom | $308,514 | $265,797 | | Renewable Energy | $22,170 | $39,045 | | Corporate and Other | $95,728 | $136,035 | | Consolidated Total | $1,066,574 | $1,083,711 | [14. Commitments and Contingencies](index=30&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's involvement in regulatory and legal proceedings, primarily in Guyana, and related financial accruals - The Government of Guyana implemented new telecommunications legislation in October 2020, ending GTT's exclusive license rights and introducing new regulatory fees, which could impact operations and services[134](index=134&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - GTT is involved in long-standing litigation in Guyana regarding spectrum fees, with the NFMU disputing GTT's payment amounts, and a lawsuit challenging GTT's exclusive license rights[138](index=138&type=chunk)[139](index=139&type=chunk) - GTT has filed lawsuits against Digicel for alleged international bypass activities, consolidated with Digicel's constitutional challenge[140](index=140&type=chunk) - The Company has accrued **$5.0 million** as of June 30, 2021, for disputed tax assessments with the Guyana Revenue Authority totaling **$44.1 million**, believing an adverse outcome is probable[141](index=141&type=chunk)[143](index=143&type=chunk) - The Company has accrued **$1.1 million** as of June 30, 2021, for a foreign judgment enforcement application in Guyana related to a **$2.8 million judgment** from Trinidad & Tobago Electric Commission (TTEC)[144](index=144&type=chunk) [15. Subsequent Events](index=32&type=section&id=15.%20SUBSEQUENT%20EVENTS) This note details the July 2021 acquisition of Alaska Communications for $340 million, funded by a new credit facility and equity investment - On July 22, 2021, the Company completed the acquisition of Alaska Communications Systems Group, Inc. for approximately **$340 million**[145](index=145&type=chunk) - The acquisition was funded by a new Alaska credit facility (**$220 million drawn**), a **$73.0 million draw** from the 2019 CoBank Credit Facility, and a **$70 million mezzanine equity investment** from Freedom 3 Investors[146](index=146&type=chunk)[148](index=148&type=chunk)[151](index=151&type=chunk) - The Company now owns approximately **52%** of Alaska Communications' common equity and controls its operations, with results to be included in the US Telecom segment from July 22, 2021[146](index=146&type=chunk) - The accounting for the business combination is not yet complete due to its size and complexity, with valuation and allocation of consideration still pending[147](index=147&type=chunk) - The Alaska Credit Facility includes a **$35.0 million revolving facility** and a **$210.0 million term loan**, with principal payments starting Q4 2023 and maturity on July 22, 2026. It is non-recourse to ATN International, Inc[148](index=148&type=chunk)[150](index=150&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial condition and results, discussing key drivers, segment performance, and significant events [Overview](index=33&type=section&id=Overview) ATN International, Inc. focuses on operating and investing in communications and technology in smaller markets, providing infrastructure solutions - The Company's core strategy is to be a leading platform for operating and investing in smaller and specialty market communications services and technology companies, delivering critical infrastructure-based solutions to rural and underserved markets[153](index=153&type=chunk) - Operations span the United States, Bermuda, and the Caribbean, providing facilities-based communications services and related information technology solutions[153](index=153&type=chunk) - The Company oversees capital allocation, provides operational expertise and shared services (billing, network, engineering, customer service) to its subsidiaries, and actively evaluates strategic acquisitions and investments[154](index=154&type=chunk)[155](index=155&type=chunk) - Operating segments include International Telecom (fixed, mobility, carrier, managed services), US Telecom (carrier, fixed, mobility, managed, private network services), and Renewable Energy (solar power in India, divested in January 2021)[156](index=156&type=chunk)[157](index=157&type=chunk)[159](index=159&type=chunk) [COVID-19](index=35&type=section&id=COVID-19) The company's Q2 2021 financials showed no material adverse COVID-19 impact, with revenue growth in both telecom segments, but future risks remain - No material adverse impact from COVID-19 was indicated for the consolidated financial statements as of and for the three months ended June 30, 2021[165](index=165&type=chunk) - International Telecom segment experienced increased Mobility, Fixed, and Carrier Services revenue due to lifted pandemic-related travel and stay-at-home restrictions and increased tourism[163](index=163&type=chunk) - US Telecom segment saw increased revenue for rural broadband services, supporting demand for remote working and connectivity[163](index=163&type=chunk) - Future material adverse impacts are possible if COVID-19 travel or stay-at-home restrictions are reinstated, particularly affecting tourism-dependent Caribbean markets and potentially causing difficulties in procuring network or retail equipment[165](index=165&type=chunk) [Acquisition of Alaska Communications](index=36&type=section&id=Acquisition%20of%20Alaska%20Communications) The company acquired Alaska Communications on July 22, 2021, for $340 million, gaining a 52% equity stake for US Telecom integration - The acquisition of Alaska Communications Systems Group, Inc. was completed on July 22, 2021, for approximately **$340 million**[166](index=166&type=chunk) - The Company now owns approximately **52%** of Alaska Communications' common equity[166](index=166&type=chunk) - Funding included a **$220 million draw** from a new Alaska credit facility and a **$73.0 million draw** from the Company's 2019 CoBank Credit Facility[166](index=166&type=chunk) - Alaska Communications' results will be included in the US Telecom segment starting July 22, 2021[166](index=166&type=chunk) [Sale of Renewable Energy Operations](index=36&type=section&id=Sale%20of%20Renewable%20Energy%20Operations) In January 2021, the company sold 67% of its Indian solar power business; the remaining 33% is now equity-accounted within Corporate and Other - The sale of **67%** of the distributed generation solar power projects in India (Vibrant Transaction) was completed in January 2021[167](index=167&type=chunk) - The post-sale results of the Company's **33% ownership interest** in Vibrant are recorded through the equity method of accounting within the Corporate and Other operating segment[167](index=167&type=chunk) - The disposition did not qualify as discontinued operations as it did not represent a strategic shift with a major effect on operations[167](index=167&type=chunk) [FirstNet Agreement](index=36&type=section&id=FirstNet%20Agreement) The FirstNet Agreement involves building AT&T's network in the Southwestern US, with $80-85 million construction revenue expected through 2022 - The Company is building a portion of AT&T's network for the First Responder Network Authority (FirstNet) in the Southwestern United States under the FirstNet Agreement[168](index=168&type=chunk) - Construction revenue of approximately **$80 million to $85 million** is expected through 2022, mainly offset by construction costs, with minimal impact on operating income[168](index=168&type=chunk) - Following site acceptance, AT&T will own the cell sites, and the Company will provide ongoing equipment and site maintenance and high-capacity transport services until 2029[169](index=169&type=chunk)[171](index=171&type=chunk) - Overall operating income contributions from the FirstNet Transaction are expected to have a relatively steady impact going forward[171](index=171&type=chunk) [Universal Service Fund](index=37&type=section&id=Universal%20Service%20Fund) The company receives funding from various USF programs for telecommunication services in high-cost areas, though Viya's support will phase out - The Company participates in Federal Universal Service Fund (USF) programs: High Cost, Lifeline, E-Rate, and Rural Health Care Support[173](index=173&type=chunk) USF Program Revenue (in thousands) | USF Program Revenue (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | High Cost Program (International Telecom - Viya) | $4,300 | $4,100 | $8,400 | $8,200 | | High Cost Program (US Telecom) | $300 | $300 | $600 | $600 | | Connect America Fund Phase II | $1,900 | $1,900 | $3,800 | $3,800 | | E-Rate, Lifeline, Rural Health Care Support (aggregate) | $1,800 | $2,200 | $3,900 | $4,400 | - Viya's USF High Cost Program support will be reduced to two-thirds (**$10.9 million**) in the first year and one-third (**$5.5 million**) in the second year following the Connect USVI Fund award, then cease[174](index=174&type=chunk) - The Company was awarded **$79.9 million over 10 years** under the Connect America Fund Phase II Auction, recorded as revenue upon receipt, and receives construction grants for network connectivity[176](index=176&type=chunk)[177](index=177&type=chunk) [CARES Act](index=38&type=section&id=CARES%20Act) The company received $18.7 million in CARES Act funding, primarily used for US Telecom network infrastructure, reducing property, plant and equipment - The Company received a total of **$18.7 million** in funding under the CARES Act[180](index=180&type=chunk) - The funding was utilized to construct network infrastructure in the US Telecom segment, with construction completed as of June 30, 2021[180](index=180&type=chunk) - **$18.4 million** of the funding was recorded as a reduction to property, plant and equipment, and **$0.3 million** was recorded as a reduction to operating expense in the six months ended June 30, 2021[180](index=180&type=chunk) [Tribal Bidding Credit](index=38&type=section&id=Tribal%20Bidding%20Credit) The company received a $7.4 million Tribal Bidding Credit for wireless service deployment on tribal lands, offsetting capital and network costs - The Company received a **$7.4 million Tribal Bidding Credit** in 2018 from the FCC to encourage wireless service deployment on tribal lands[181](index=181&type=chunk) - An estimated **$6.1 million** will offset capital costs (reducing future depreciation expense), and **$1.3 million** will offset network support costs (reducing future operating expense)[181](index=181&type=chunk) - Through June 30, 2021, **$6.1 million** has been spent on capital expenditures, and **$0.6 million** was recorded as offsets to network support costs during the six months ended June 30, 2021[181](index=181&type=chunk) [CBRS Auction](index=38&type=section&id=CBRS%20Auction) In Q3 2020, the company successfully bid $20.4 million for CBRS Priority Access Licenses (PALs) and expects to meet build-out obligations - The Company participated in the FCC's Citizens Broadband Radio Service (CBRS) auction in Q3 2020, winning Priority Access Licenses (PALs) in the 3.5 GHz spectrum band[182](index=182&type=chunk) - The total cost for these strategically located PALs was approximately **$20.4 million**[182](index=182&type=chunk) - The Company expects to comply with all CBRS spectrum build-out obligations associated with these 10-year renewable licenses[182](index=182&type=chunk) [RDOF](index=38&type=section&id=RDOF) The company anticipates $20.1 million over 10 years from the RDOF Phase I Auction, obligating broadband and voice services to over 10,000 households - The Company expects to receive approximately **$20.1 million over 10 years** from the 2020 Rural Digital Opportunity Fund (RDOF) Phase I Auction, pending FCC conclusion of the award process[183](index=183&type=chunk) - This funding will obligate the Company to provide broadband and voice services to over **10,000 eligible households** in the United States[183](index=183&type=chunk) [Selected Segment Financial Information (Three Months)](index=39&type=section&id=Selected%20Segment%20Financial%20Information) Q2 2021 saw International Telecom revenue growth and a surge in US Telecom revenue, while US Telecom's operating income declined due to increased costs Revenue by Segment (in thousands) - 3 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $86,218 | $80,064 | $6,154 | 7.7% | | US Telecom | $37,647 | $28,160 | $9,487 | 33.7% | | Renewable Energy | $— | $874 | $(874) | -100.0% | | Consolidated Total | $123,865 | $109,098 | $14,767 | 13.5% | Operating Income (Loss) by Segment (in thousands) - 3 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $14,643 | $14,617 | $26 | 0.2% | | US Telecom | $(556) | $1,826 | $(2,382) | -130.4% | | Renewable Energy | $(771) | $(620) | $(151) | -24.4% | | Corporate and Other | $(10,411) | $(8,799) | $(1,612) | 18.3% | | Consolidated Total | $2,905 | $7,024 | $(4,119) | -58.6% | - International Telecom revenue increased by **7.6%** due to growth in Fixed and Mobility subscribers, higher average revenue per subscriber, and increased Carrier Services revenue from tourism[189](index=189&type=chunk) - US Telecom revenue increased by **33.3%** primarily due to construction revenue from the FirstNet Transaction and higher Fixed revenues, partially offset by reduced Carrier Services revenue[191](index=191&type=chunk) - US Telecom operating income decreased to a loss of **$0.6 million** from income of **$1.8 million**, driven by increased construction costs for FirstNet, CARES Act-funded build-outs, and private network investments[192](index=192&type=chunk) - Renewable Energy segment generated no revenue or operating expenses in Q2 2021 following the Vibrant Transaction completion[193](index=193&type=chunk) [Results of Operations for the Three Months Ended June 30, 2021 and 2020](index=41&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202021%20and%202020) Q2 2021 total revenue increased by 13.5%, but operating and net income decreased significantly due to higher operating expenses Key Financial Metrics (in thousands) - 3 Months Ended June 30 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $123,865 | $109,098 | $14,767 | 13.5% | | Income from Operations | $2,905 | $7,024 | $(4,119) | -58.6% | | Net Income Attributable to ATN International, Inc. Stockholders | $2,019 | $4,746 | $(2,727) | -57.5% | - Total operating expenses increased by **18.5% to $120.9 million**, largely due to new cost of construction revenue (**$9.5 million**), a **19.1% rise** in selling, general and administrative expenses, and a significant increase in transaction-related charges (**1,838.9%**)[196](index=196&type=chunk) - Depreciation and amortization expenses decreased by **8.3%**, while loss on disposition of long-lived assets increased significantly[196](index=196&type=chunk) - Income before income taxes decreased by **71.4% to $1.7 million**[196](index=196&type=chunk) [Communications services revenue](index=41&type=section&id=Communications%20services%20revenue) Communication services revenue increased by 6.3% for Q2 2021, driven by growth in Mobility and Fixed services Communication Services Revenue (in thousands) | Revenue Type (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Communication services | $112,964 | $106,240 | $6,724 | 6.3% | | Mobility revenue | $25,161 | $21,429 | $3,732 | 17.4% | | Fixed communications revenue | $65,003 | $61,504 | $3,499 | 5.7% | | Carrier Services revenue | $22,561 | $22,753 | $(192) | -0.8% | | Other communications services revenue | $239 | $554 | $(315) | -56.9% | [Other revenue](index=43&type=section&id=Other%20revenue) Other revenue surged by 281.4% for Q2 2021, primarily due to $9.3 million in new construction revenue from the FirstNet Agreement Other Revenue (in thousands) | Revenue Type (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Other revenue | $10,901 | $2,858 | $8,043 | 281.4% | | Renewable energy revenue | $— | $874 | $(874) | -100.0% | | Managed Services revenue | $1,576 | $1,984 | $(408) | -20.6% | | Construction revenue | $9,325 | $— | $9,325 | 100.0% | - Construction revenue of **$9.3 million** was recognized from the FirstNet Agreement, with **40%** of cell sites completed as of June 30, 2021[214](index=214&type=chunk) [Operating expenses](index=44&type=section&id=Operating%20expenses) Total operating expenses increased by 18.5% for Q2 2021, driven by construction costs, higher SG&A, and transaction charges Operating Expenses (in thousands) | Expense Type (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $120,960 | $102,074 | $18,886 | 18.5% | | Cost of services | $48,479 | $45,837 | $2,642 | 5.8% | | Cost of construction revenue | $9,535 | $— | $9,535 | 100.0% | | Selling, general and administrative | $40,652 | $34,125 | $6,527 | 19.1% | | Transaction-related charges | $1,396 | $72 | $1,324 | 1,838.9% | | Depreciation and amortization | $20,155 | $21,991 | $(1,836) | -8.3% | | Loss on disposition of long-lived assets | $743 | $49 | $694 | 1,416.3% | - Cost of services increased by **5.8%**, driven by increased demand for products in International Telecom and private network development, data transport costs for FirstNet, and CARES Act-funded operations in US Telecom[216](index=216&type=chunk) - Selling, general and administrative expenses increased by **19.1%**, mainly due to higher telecommunications license, legal, and regulatory fees in International Telecom, increased spending in US Telecom's private network and retail operations, and higher non-cash equity compensation and integration costs at Corporate Overhead[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - Transaction-related charges of **$1.4 million** were primarily related to the Alaska Transaction[224](index=224&type=chunk) - Depreciation and amortization expenses decreased by **8.3%** due to certain assets becoming fully depreciated across segments[226](index=226&type=chunk)[227](index=227&type=chunk) [Other income (expense)](index=46&type=section&id=Other%20income%20(expense)) Net other income (expense) shifted to a $0.1 million expense in Q2 2021, due to non-controlling investment losses and foreign currency Other Income (Expense) (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest income | $46 | $66 | $(20) | -30.3% | | Interest expense | $(1,137) | $(1,574) | $437 | -27.8% | | Other income (expense) | $(66) | $590 | $(656) | -111.2% | | Other income (expense), net | $(1,157) | $(918) | $(239) | 26.0% | - Interest income decreased due to reduced cash balances and returns[229](index=229&type=chunk) - Interest expense decreased due to reduced debt balances in International Telecom, despite new borrowings under the Receivables Credit Facility[230](index=230&type=chunk) - Other income (expense) in Q2 2021 was a **$0.1 million expense**, mainly from losses on non-controlling investments and foreign currency transactions[232](index=232&type=chunk) [Income taxes](index=47&type=section&id=Income%20taxes) The effective tax rate for Q2 2021 was (88.2%), significantly lower than the prior year, influenced by income mix and discrete items Effective Tax Rate and Income Tax Provisions (in thousands) | Metric | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | | :--- | :--- | :--- | | Effective Tax Rate | (88.2%) | (37.0%) | | Income tax provisions (in thousands) | $(1,542) | $(2,258) | - The effective tax rate was impacted by the mix of income among jurisdictions and discrete items, including a **$3.4 million benefit** from the reversal of an unrecognized tax position and a **$0.5 million expense** for interest on unrecognized tax positions[233](index=233&type=chunk) [Net income attributable to non-controlling interests, net of tax](index=47&type=section&id=Net%20income%20attributable%20to%20non-controlling%20interests,%20net%20of%20tax) Net income attributable to non-controlling interests decreased by 64.9% for Q2 2021, due to increased ownership and decreased subsidiary profitability Net Income Attributable to Non-Controlling Interests (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to non-controlling interests, net of tax | $(1,271) | $(3,618) | $2,347 | -64.9% | - International Telecom saw a **28.0% decrease** in non-controlling interests' net income due to increased Company ownership and decreased profitability in some subsidiaries[236](index=236&type=chunk) - US Telecom shifted from an allocation of income of **$1.1 million** to a loss of **$0.6 million** for non-controlling interests, driven by decreased profitability in US Mobility retail operations and allocation of Alaska Transaction costs[237](index=237&type=chunk) [Net income attributable to ATN International, Inc. stockholders](index=47&type=section&id=Net%20income%20attributable%20to%20ATN%20International,%20Inc.%20stockholders) Net income attributable to ATN International, Inc. stockholders decreased by 57.5% to $2.0 million for Q2 2021, with diluted EPS of $0.13 Net Income Attributable to ATN International, Inc. Stockholders (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to ATN International, Inc. stockholders | $2,019 | $4,746 | $(2,727) | -57.5% | | Diluted EPS | $0.13 | $0.30 | $(0.17) | -56.7% | [Selected Segment Financial Information (Six Months)](index=48&type=section&id=Selected%20Segment%20Financial%20Information%20(Six%20Months)) H1 2021 saw International Telecom revenue growth and significant US Telecom revenue growth, while US Telecom's operating income shifted to a loss Revenue by Segment (in thousands) - 6 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $170,036 | $162,349 | $7,687 | 4.7% | | US Telecom | $77,921 | $55,459 | $22,462 | 40.5% | | Renewable Energy | $418 | $2,196 | $(1,778) | -81.0% | | Consolidated Total | $248,375 | $220,004 | $28,371 | 12.9% | Operating Income (Loss) by Segment (in thousands) - 6 Months Ended June 30 | Segment | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | International Telecom | $27,786 | $28,005 | $(219) | -0.8% | | US Telecom | $(1,090) | $4,019 | $(5,109) | -127.1% | | Renewable Energy | $(1,433) | $(1,077) | $(356) | 33.1% | | Corporate and Other | $(19,009) | $(16,623) | $(2,386) | 14.3% | | Consolidated Total | $6,254 | $14,324 | $(8,070) | -56.3% | - International Telecom revenue increased by **4.7%** due to growth in Fixed and Mobility subscribers and increased Carrier Services revenue from tourism[243](index=243&type=chunk) - US Telecom revenue increased by **40.4%** primarily due to construction revenue from the FirstNet Transaction and higher Fixed revenues, partially offset by reduced Carrier Services revenue[245](index=245&type=chunk) - US Telecom operating income decreased to a loss of **$1.1 million** from income of **$4.0 million**, driven by increased construction costs for FirstNet, CARES Act-funded build-outs, and private network investments[246](index=246&type=chunk) - Renewable Energy segment generated minimal revenue and incurred operating losses in Q2 2021 following the Vibrant Transaction completion[247](index=247&type=chunk) [Results of Operations for the Six Months Ended June 30, 2021 and 2020](index=50&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202021%20and%202020) H1 2021 total revenue increased by 12.9%, but operating income decreased significantly due to substantial increases in operating expenses Key Financial Metrics (in thousands) - 6 Months Ended June 30 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $248,375 | $220,004 | $28,371 | 12.9% | | Income from Operations | $6,254 | $14,324 | $(8,070) | -56.3% | | Net Income | $7,565 | $10,742 | $(3,177) | -29.6% | | Net Income Attributable to ATN International, Inc. Stockholders | $4,723 | $3,733 | $990 | 26.5% | - Total operating expenses increased by **17.7% to $242.1 million**, driven by new cost of construction revenue (**$22.1 million**), a **14.3% rise** in selling, general and administrative expenses, and a significant increase in transaction-related charges (**1,732.8%**)[250](index=250&type=chunk) - Other income (expense), net, significantly improved from an expense of **$4.7 million** to an income of **$0.1 million**, primarily due to gains from non-controlling investments[250](index=250&type=chunk) - Income before income taxes decreased by **34.1% to $6.3 million**[250](index=250&type=chunk) [Communications services revenue](index=50&type=section&id=Communications%20services%20revenue) Communication services revenue increased by 4.4% for H1 2021, driven by growth in Mobility and Fixed services Communication Services Revenue (in thousands) | Revenue Type (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Communication services | $223,599 | $214,145 | $9,454 | 4.4% | | Mobility revenue | $49,842 | $43,968 | $5,874 | 13.4% | | Fixed communications revenue | $130,121 | $124,818 | $5,303 | 4.2% | | Carrier Services revenue | $43,180 | $44,468 | $(1,288) | -2.9% | | Other communications services revenue | $456 | $891 | $(435) | -48.8% | [Other revenue](index=51&type=section&id=Other%20revenue) Other revenue significantly increased by 322.9% for H1 2021, primarily due to $21.6 million in new construction revenue from FirstNet Other Revenue (in thousands) | Revenue Type (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Other revenue | $24,776 | $5,859 | $18,917 | 322.9% | | Renewable energy revenue | $418 | $2,196 | $(1,778) | -81.0% | | Managed Services revenue | $2,726 | $3,663 | $(937) | -25.6% | | Construction revenue | $21,632 | $— | $21,632 | 100.0% | - Construction revenue of **$21.6 million** was recognized from the FirstNet Agreement, with **40%** of cell sites completed as of June 30, 2021[257](index=257&type=chunk) [Operating expenses](index=51&type=section&id=Operating%20expenses) Total operating expenses increased by 17.7% for H1 2021, driven by construction costs, higher SG&A, and transaction charges Operating Expenses (in thousands) | Expense Type (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating expenses | $242,121 | $205,680 | $36,441 | 17.7% | | Cost of services | $97,986 | $92,439 | $5,547 | 6.0% | | Cost of construction revenue | $22,142 | $— | $22,142 | 100.0% | | Selling, general and administrative | $78,344 | $68,552 | $9,792 | 14.3% | | Transaction-related charges | $2,126 | $116 | $2,010 | 1,732.8% | | Depreciation and amortization | $40,662 | $44,509 | $(3,847) | -8.6% | | Loss on disposition of long-lived assets | $861 | $64 | $797 | 1,245.3% | - Cost of services increased by **6.0%**, driven by increased demand in International Telecom and higher data transport costs for FirstNet in US Telecom[260](index=260&type=chunk) - Selling, general and administrative expenses increased by **14.3%**, mainly due to higher legal and regulatory fees in International Telecom, increased spending in US Telecom's private network and retail operations, and higher non-cash equity compensation and integration costs at Corporate Overhead[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - Transaction-related charges of **$2.1 million** were primarily related to the Alaska Transaction[265](index=265&type=chunk) - Depreciation and amortization expenses decreased by **8.5%** due to certain assets becoming fully depreciated across segments, partially offset by capital expenditures[265](index=265&type=chunk)[266](index=266&type=chunk) [Other income (expense)](index=53&type=section&id=Other%20income%20(expense)) Net other income (expense) significantly improved to a $2.3 million income in H1 2021, primarily due to gains from non-controlling investments Other Income (Expense) (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Interest income | $40 | $309 | $(269) | -87.1% | | Interest expense | $(2,285) | $(2,730) | $445 | -16.3% | | Other expense | $2,309 | $(2,310) | $4,619 | -200.0% | | Other expense, net | $64 | $(4,731) | $4,795 | -101.4% | - Other income (expense) in H1 2021 was **$2.3 million income**, primarily from gains on non-controlling investments, partially offset by foreign currency losses[268](index=268&type=chunk) - Interest expense decreased due to reduced debt balances in International Telecom, despite new borrowings under the Receivables Credit Facility[268](index=268&type=chunk) [Income taxes](index=54&type=section&id=Income%20taxes) The effective tax rate for H1 2021 was (19.7%), influenced by income mix across jurisdictions and discrete items Effective Tax Rate and Income Tax Expense (in thousands) | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :--- | :--- | :--- | | Effective Tax Rate | (19.7%) | (12.0%) | | Income tax expense (in thousands) | $(1,247) | $(1,149) | - The effective tax rate was impacted by the mix of income among jurisdictions and discrete items, including a **$3.4 million benefit** from the reversal of an unrecognized tax position and a **$1.0 million expense** for interest on unrecognized tax positions[271](index=271&type=chunk) [Net income attributable to non-controlling interests, net of tax](index=54&type=section&id=Net%20income%20attributable%20to%20non-controlling%20interests,%20net%20of%20tax) Net income attributable to non-controlling interests decreased by 59.5% for H1 2021, due to increased ownership and decreased subsidiary profitability Net Income Attributable to Non-Controlling Interests (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to non-controlling interests, net of tax | $(2,842) | $(7,009) | $4,167 | -59.5% | - International Telecom saw a **30.0% decrease** in non-controlling interests' net income due to increased Company ownership and decreased profitability in some subsidiaries[274](index=274&type=chunk) - US Telecom saw a **$2.0 million decrease** in non-controlling interests' net income, driven by decreased profitability in US Mobility retail operations and allocation of Alaska Transaction costs[275](index=275&type=chunk) [Net income attributable to ATN International, Inc. stockholders](index=54&type=section&id=Net%20income%20attributable%20to%20ATN%20International,%20Inc.%20stockholders) Net income attributable to ATN International, Inc. stockholders increased by 26.5% to $4.7 million for H1 2021, with diluted EPS of $0.30 Net Income Attributable to ATN International, Inc. Stockholders (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to ATN International, Inc. stockholders | $4,723 | $3,733 | $990 | 26.5% | | Diluted EPS | $0.30 | $0.23 | $0.07 | 30.4% | [Regulatory and Tax Issues](index=55&type=section&id=Regulatory%20and%20Tax%20Issues) The company faces regulatory and tax proceedings, particularly in Guyana, and addresses Tax Cuts and Jobs Act and CARES Act implications - The Company is involved in regulatory and tax proceedings, particularly in Guyana, where adverse outcomes could materially impact its financial condition and future operations[278](index=278&type=chunk) - The Tax Cuts and Jobs Act of 2017 (Tax Act) introduced significant changes to US corporate income tax, including GILTI and BEAT, but the Company does not currently project a GILTI inclusion for 2021 and does not expect to be subject to BEAT[279](index=279&type=chunk) - The CARES Act permits NOL carryovers and carrybacks to offset **100%** of taxable income for taxable years before 2021 and allows NOLs from 2018-2020 to be carried back five years, impacting income tax provision computations[280](index=280&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is met through cash, internal funds, and credit facilities, with $96.0 million cash and $87.7 million debt as of June 30, 2021 - The Company's liquidity needs are met through cash-on-hand, internally generated funds, and credit facilities, with current resources believed sufficient for at least the next twelve months[281](index=281&type=chunk) Liquidity Metrics (in thousands) | Metric (in thousands) | June 30, 2021 | | :--- | :--- | | Cash, cash equivalents, and restricted cash | $96,000 | | Debt, net of unamortized deferred financing costs | $87,700 | | Foreign subsidiaries' cash (indefinitely invested) | $40,100 | [Uses of Cash](index=55&type=section&id=Uses%20of%20Cash) Cash is used for acquisitions, capital expenditures, working capital, income taxes, dividends, and stock repurchases, with decreased investing and financing cash use for H1 2021 - Cash is used for acquisitions, capital expenditures, working capital, income taxes, dividends, and stock repurchases[282](index=282&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk)[290](index=290&type=chunk) Cash Flow Items (in thousands) | Cash Flow Item (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Cash used in investing activities | $(25,285) | $(54,733) | $29,448 |

Financial Data and Key Metrics Changes - Total consolidated revenues for Q2 2021 were $123.9 million, up 14% from the previous year, while consolidated adjusted EBITDA was $25.2 million compared to $29.1 million in Q2 2020 [19][24] - Consolidated net income for the quarter was $2 million or $0.13 per share, aided by a tax benefit of $1.5 million [24][25] Business Line Data and Key Metrics Changes - International Telecom segment revenues increased by 8% from $80.1 million last year to $86.2 million this quarter, with adjusted EBITDA slightly down from $28.7 million to $28.4 million [19][20] - US Telecom segment revenues rose to $37.6 million from $28.2 million a year ago, including $9.3 million of construction revenue related to the FirstNet project [21][24] - Adjusted EBITDA for the US Telecom segment declined to $4.5 million from $7.5 million due to higher operating costs [21] Market Data and Key Metrics Changes - Broadband growth in the international telecom segment saw a 6% year-on-year increase in subscribers, while mobile subscriber levels grew by 16% [13][15] - Rural broadband revenue in the US markets grew approximately 10% in the first half of the year [12] Company Strategy and Development Direction - The acquisition of Alaska Communications is seen as a strategic fit to enhance the company's core business strategy of building critical communications infrastructure in remote markets [6][8] - The company is pursuing a fiber-first strategy to connect rural communities, leveraging government incentives and partnerships [11][12] - There is a focus on expanding private networks and managed services, with plans to refine and accelerate business strategies [10][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of revenue streams, with over 75% of revenue showing signs of recovery [17] - The company anticipates significant capital expenditures in the near term to support network expansion and fiber builds [31] - Management is hopeful about opportunities arising from government infrastructure initiatives, particularly in rural broadband [42] Other Important Information - The company expects Alaska acquisitions to contribute between $105 million and $109 million in revenue and $27 million to $29 million in adjusted EBITDA [23] - Capital expenditures for the international telecom segment are expected to be at the higher end of the guidance of $45 million to $55 million for the year [21] Q&A Session Summary Question: How should we think about Alaska's impact on segment reporting? - Management indicated a hybrid reporting approach, combining service type and customer type for Alaska's segment reporting [29] Question: What is the expected capital intensity for Alaska? - Management expects significant capital expenditures for new fiber builds, with reimbursement opportunities from anchor tenants [31] Question: How will government incentives affect capital expenditures? - Reimbursements from government programs will be recorded as revenue, impacting capital expenditure reporting [34] Question: What opportunities exist for strategic partnerships? - Management noted potential interest from infrastructure and private equity funds, depending on the use of proceeds [40] Question: How does the company plan to leverage the infrastructure bill for rural broadband? - Management sees opportunities in state and local distributions from federal funding, leveraging existing relationships in operational areas [42] Question: What is the current demand for private networks? - There is growing interest in private network solutions, particularly with the expansion of 5G technologies [45] Question: How many miles of fiber does the company currently have? - Management refrained from disclosing specific fiber mileage but emphasized a fiber-forward approach in various markets [48] Question: What improvements can be made in Alaska? - Management believes operational capabilities and focus on core business will enhance performance in Alaska [51]

Financial Data and Key Metrics Changes - Total consolidated revenues for Q1 2021 were $124.5 million, up 12% from $110.9 million in Q1 2020 [12] - Consolidated adjusted EBITDA decreased to $24.7 million from $29.9 million in the first quarter of 2020 [12] - Consolidated net income for the quarter was $2.7 million or $0.17 per share, which includes a $2.5 million write-up of one of the minority investments [16] Business Line Data and Key Metrics Changes - In the International Telecom segment, revenues increased to $83.8 million from $82.3 million year-on-year, while adjusted EBITDA decreased to $26.9 million from $27.8 million [13] - U.S. Telecom segment revenues rose to $40.3 million from $27.3 million a year ago, including $12.3 million from the FirstNet project [14] - Adjusted EBITDA for the U.S. Telecom segment declined to $4.6 million from $8.1 million due to higher operating costs [15] Market Data and Key Metrics Changes - Fixed data subscribers in the International Telecom segment increased by about 9% year-on-year, with mobile subscribers also up by 9% [7] - Video subscribers continued to decline, while voice subscribers remained steady [8] - The overall economic activity in the markets remains historically low due to the pandemic, impacting roaming and commercial customer revenues [8] Company Strategy and Development Direction - The company is focusing on cost reduction initiatives in several markets to address rising expenses [8] - The acquisition of Alaska Communications is expected to enhance revenue synergies and accelerate execution of their business strategy [11] - The company is exploring opportunities in federal infrastructure programs to address the digital divide [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the quarter was largely in line with expectations, with strong revenue drivers in International Telecom despite ongoing pandemic challenges [6] - There is optimism regarding the infrastructure bill and its potential benefits for communications infrastructure builds [20] - Management anticipates a pickup in revenue as travel restrictions ease and vaccination efforts progress [8] Other Important Information - The company completed a partial exit from its Indian renewable energy business, allowing a focus on communication services closer to home [6] - Capital expenditures for the quarter were reported at $10.5 million for the International Telecom segment and $14.9 million for the U.S. Telecom segment [14][16] Q&A Session Summary Question: Can you expand on the infrastructure bill and its implications? - Management is closely monitoring the infrastructure bill and believes there is bipartisan support for communications infrastructure builds, with significant funding expected [20][21] Question: What is the expected timeline for the Alaska acquisition? - Management expressed a "get it done" attitude regarding the acquisition, with expectations for closing in the coming months [27][30] Question: What is the status of private networks and their revenue generation? - The company is generating revenue from private networks but anticipates that the prospective revenue is much larger than current figures [44] Question: How does the Alaska acquisition impact cash taxes? - The acquisition is expected to be beneficial for cash taxes due to existing net operating losses [57] Question: What percentage of international EBITDA does One Communications contribute? - Management did not provide a specific breakdown but indicated that One Communications is a substantial contributor to the international segment [39]

Part I [Business](index=3&type=section&id=Item%201.%20Business) The company operates communications and technology businesses in underserved markets across three primary segments [Overview](index=3&type=section&id=Overview) The company operates through International Telecom, US Telecom, and Renewable Energy segments with key recent strategic moves - ATN operates and invests in communications services and technology companies in underserved markets, providing infrastructure-based solutions[7](index=7&type=chunk)[8](index=8&type=chunk) Operating Segments as of Dec 31, 2020 | Segment | Description | | :--- | :--- | | **International Telecom** | Offers fixed data, internet, voice, mobility, video, and managed services in Bermuda, Cayman Islands, Guyana, and US Virgin Islands | | **US Telecom** | Offers wholesale carrier services (roaming, infrastructure leasing), fixed, mobility, and private network services, primarily in the US Southwest | | **Renewable Energy** | Provided distributed generation solar power in India (until Jan 2021) and previously in the US | - In January 2021, the company sold **67% of its Indian solar business** (Vibrant) and will account for its remaining **33% interest** using the equity method[16](index=16&type=chunk) - Announced a pending acquisition of Alaska Communications in a deal valued at approximately **$340 million**, where ATN will own about **51%**[13](index=13&type=chunk)[15](index=15&type=chunk) [Strategy](index=5&type=section&id=Strategy) The company's strategy focuses on underserved markets, partnerships, local management, and disciplined capital allocation - Focus on operating in smaller, rural, or underserved markets to become a leading provider of communications infrastructure and services[18](index=18&type=chunk) - Seek partnerships with investment funds, offering operational know-how and a track record in managing communications networks[20](index=20&type=chunk) - Collaborate with local management teams, leveraging their market knowledge while providing centralized operational, technical, and financial expertise[21](index=21&type=chunk) - Apply a disciplined, return-on-investment approach to capital allocation, investing in early-stage businesses for long-term growth and supporting mature businesses to preserve cash flow[22](index=22&type=chunk) [Communications Services](index=6&type=section&id=Communications%20Services) The division comprises the International and US Telecom segments, which provide a range of mobility, fixed, and carrier services Segment Revenue Contribution (FY 2020 & 2019) | Segment | 2020 Revenue % | 2019 Revenue % | | :--- | :--- | :--- | | International Telecom | 72% | 73% | | US Telecom | 27% | 25% | [International Telecom Segment](index=6&type=section&id=International%20Telecom%20Segment) This segment provides mobility, fixed, and carrier services in several Caribbean markets and Bermuda International Telecom Subscribers (as of Dec 31, 2020) | Service | Subscribers | | :--- | :--- | | Mobility | ~304,000 | | High-Speed Broadband | ~141,000 | | Fixed Voice Access Lines | ~169,000 | | Video | ~36,000 | - The segment operates 454 wireless base stations and connects to the world via ownership in six undersea fiber-optic cables[26](index=26&type=chunk)[36](index=36&type=chunk) - In October 2020, the Government of Guyana implemented new legislation to introduce competition, impacting the company's previously exclusive agreement for domestic fixed and international voice/data services[39](index=39&type=chunk) [US Telecom Segment](index=9&type=section&id=US%20Telecom%20Segment) This segment provides wholesale carrier services in rural US markets and is building a network for the First Responder Network - The segment has roaming agreements with all three US national wireless operators (Verizon, AT&T, T-Mobile), with **AT&T and Verizon accounting for ~15% of total consolidated revenue in 2020**[41](index=41&type=chunk) - Under the FirstNet Agreement with AT&T, the company is building a network for the First Responder Network Authority and recorded **$10.9 million in construction revenue in 2020**[43](index=43&type=chunk) - As of December 31, 2020, the segment owned and operated **1,044 domestic base stations** on 453 sites[50](index=50&type=chunk) - The primary competitive threat is the risk of carrier customers building their own infrastructure ('over-building') in markets where ATN provides wholesale services[51](index=51&type=chunk)[45](index=45&type=chunk) [Renewable Energy Services](index=11&type=section&id=Renewable%20Energy%20Services) The company divested its primary renewable energy operations in India while retaining a minority stake - On January 27, 2021, the company sold a **67% interest** in its Indian solar business (Vibrant) for **~$21 million**, retaining a 33% interest[54](index=54&type=chunk) - The business operated by securing long-term Power Purchase Agreements (PPAs) with commercial and industrial customers, providing predictable cash flows[55](index=55&type=chunk) [Human Capital](index=12&type=section&id=Human%20Capital) The company employs approximately 1,700 people, with a significant union presence internationally and a focus on diversity - Employed approximately **1,700 people** as of year-end 2020, with ~1,000 internationally and ~700 in the US[60](index=60&type=chunk) - Approximately **half of the Guyana and US Virgin Islands workforce** and **20% of the Bermuda workforce** are represented by unions[60](index=60&type=chunk) - Reports a diverse management team, with **~30% of senior management identifying as persons of color** and **~15% as women**[62](index=62&type=chunk) [Regulation](index=12&type=section&id=Regulation) Operations are subject to extensive government regulation in the US and internationally, covering licensing, rates, and competition [US Federal Regulation](index=12&type=section&id=US%20Federal%20Regulation) US operations are heavily regulated by the FCC, which governs spectrum, network obligations, and Universal Service Fund programs - Awarded **$79.9 million over 10 years** under the Connect America Fund Phase II Auction to provide fixed broadband and voice services in certain US areas[89](index=89&type=chunk) - Faces a significant reduction in Universal Service Fund (USF) support in the US Virgin Islands, with its historical annual support of **~$16.4 million** provisionally awarded to a competitor[90](index=90&type=chunk)[91](index=91&type=chunk) - Won Priority Access Licenses (PALs) in 590 U.S. counties in the FCC's 2020 auction of 3.5 GHz CBRS spectrum[67](index=67&type=chunk) [US Virgin Islands Regulation](index=18&type=section&id=US%20Virgin%20Islands%20Regulation) Operations are regulated by the local Public Service Commission and benefit from significant tax exemptions - The Virgin Islands Public Service Commission (PSC) regulates rates for certain local exchange services provided by the company's subsidiary, Viya[103](index=103&type=chunk) - Receives significant tax exemptions through the RTPark program, which totaled approximately **$1.9 million in 2020** and **$1.8 million in 2019**[106](index=106&type=chunk) [Guyana Regulation](index=19&type=section&id=Guyana%20Regulation) The regulatory landscape in Guyana changed significantly in 2020, ending the company's historical service exclusivity - On October 5, 2020, the Government of Guyana implemented legislation that effectively **ended GTT's exclusive license** to provide domestic fixed and international voice/data services[111](index=111&type=chunk) - New licenses were issued to GTT and two competitors, introducing legal competition into the sector for the first time[111](index=111&type=chunk) [Bermuda Regulation](index=20&type=section&id=Bermuda%20Regulation) The company faces regulatory remedies in Bermuda after being designated as having significant market power - The Regulatory Authority of Bermuda affirmed that the company has **significant market power** in certain broadband and mobile services as of September 1, 2020[116](index=116&type=chunk) - As a result of the significant market power determination, the company is subject to remedies including price caps, wholesale obligations, and accounting separation, which it is legally challenging[116](index=116&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks related to operations, regulation, strategy, and economic conditions - **Operational Risk:** Failure to meet construction milestones or service levels for the AT&T FirstNet project could lead to termination of the agreement, impacting the US Telecom segment[127](index=127&type=chunk)[130](index=130&type=chunk) - **Regulatory Risk:** The provisional loss of Universal Service Fund (USF) support in the US Virgin Islands to a competitor could negatively affect the company's ability to build, maintain, and operate networks in the territory[170](index=170&type=chunk)[173](index=173&type=chunk) - **Political Risk:** The 2020 implementation of new telecommunications legislation in Guyana, ending GTT's exclusivity, creates significant uncertainty and competitive risk[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - **Economic Risk:** The COVID-19 pandemic has negatively impacted tourism-dependent Caribbean markets, reducing roaming revenue and potentially affecting customers' ability to pay for services[131](index=131&type=chunk)[185](index=185&type=chunk) - **Strategic Risk:** The company faces significant competition in its US wholesale business from carriers choosing to 'over-build' their own networks, reducing the need for roaming services[151](index=151&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) None - None[193](index=193&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters and utilizes a mix of owned and leased properties for its global operations - Leases corporate headquarters of approximately 21,000 square feet in Beverly, MA[193](index=193&type=chunk) - Globally **owns 286 towers** and **leases an additional 373 towers** for its communications operations[195](index=195&type=chunk) Operational Space by Segment (Approx. sq. ft.) | Type of Space | International Telecom | US Telecom | Renewable Energy | | :--- | :--- | :--- | :--- | | Office | 287,467 | 94,385 | 2,810 | | Retail stores | 24,182 | 17,011 | — | | Technical operations | 1,941,049 | 130,616 | — | [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in legal proceedings primarily concerning its Guyana subsidiary's license and tax disputes - GTT's exclusive license in Guyana is being challenged in court by competitor Digicel[200](index=200&type=chunk) - GTT has filed lawsuits against Digicel alleging illegal international bypass, seeking injunctive relief and damages[201](index=201&type=chunk) - GTT is involved in tax disputes with the Guyana Revenue Authority totaling **$44.1 million**, for which the company has accrued **$5.0 million** as of December 31, 2020[202](index=202&type=chunk)[704](index=704&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not Applicable - Not Applicable[203](index=203&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=35&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq, with a repurchase plan in place and recent underperformance against key indices - The company's common stock is listed on the Nasdaq Global Select Market under the symbol 'ATNI'[212](index=212&type=chunk) - As of December 31, 2020, **$30.9 million remained authorized for repurchase** under the 2016 Repurchase Plan, with no shares repurchased in Q4 2020[213](index=213&type=chunk) 5-Year Stock Performance Comparison (Value of $100 Investment) | Index | 12/31/15 | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **ATN International** | $100.00 | $104.26 | $73.06 | $95.59 | $74.91 | **$57.22** | | **Russell 2000** | $100.00 | $121.31 | $139.08 | $123.76 | $155.35 | **$186.36** | | **S&P Smallcap 600** | $100.00 | $126.56 | $143.30 | $131.15 | $161.03 | **$179.20** | | **Nasdaq Telecom** | $100.00 | $112.56 | $135.96 | $125.10 | $158.73 | **$192.30** | [Selected Financial Data](index=36&type=section&id=Item%206.%20Selected%20Financial%20Data) The company reported a net loss of $14.1 million on $455.4 million in revenue for fiscal year 2020 Selected Financial Data (Years Ended Dec 31, In thousands, except per share data) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Income Statement Data** | | | | | | | Revenue | $455,444 | $438,722 | $451,207 | $481,193 | $457,003 | | Income from operations | $9,180 | $13,377 | $61,023 | $55,308 | $51,270 | | Net income (loss) attributable to ATN Stockholders | $(14,122) | $(10,806) | $19,815 | $31,488 | $12,101 | | Diluted EPS | $(0.89) | $(0.68) | $1.24 | $1.94 | $0.75 | | **Balance Sheet Data (End of Period)** | | | | | | | Total assets | $1,083,711 | $1,130,726 | $1,107,304 | $1,205,605 | $1,198,218 | | Long-term debt, net | $69,073 | $82,676 | $86,294 | $144,873 | $144,383 | | **Cash Flow Data** | | | | | | | Net cash from operating activities | $86,284 | $87,903 | $115,865 | $145,725 | $111,656 | | Capital expenditures | $(75,323) | $(72,725) | $(185,921) | $(142,371) | $(124,282) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 3.8% in 2020, but operating income fell due to a large disposition loss and COVID-19 impacts [Results of Operations: 2020 vs. 2019](index=44&type=section&id=Results%20of%20Operations:%20Years%20Ended%20December%2031,%202020%20and%202019) Revenue increased 3.8% in 2020, but a $21.6 million disposition loss drove a 31.4% decline in operating income Consolidated Results of Operations (2020 vs. 2019, in thousands) | Line Item | 2020 | 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$455,444** | **$438,722** | **$16,722** | **3.8%** | | Communication services | $433,509 | $428,108 | $5,401 | 1.3% | | Other revenue | $21,935 | $10,614 | $11,321 | 106.7% | | **Total operating expenses** | **$446,264** | **$425,345** | **$20,919** | **4.9%** | | Loss on disposition | $21,572 | $2,841 | $18,731 | 659.3% | | **Income from operations** | **$9,180** | **$13,377** | **$(4,197)** | **(31.4)%** | | **Net Loss Attributable to ATN Stockholders** | **$(14,122)** | **$(10,806)** | **$(3,316)** | **30.7%** | - International Telecom revenue increased 1.3% to **$328.6 million**, as growth in broadband services offset declines in Carrier and Mobility services due to COVID-19[261](index=261&type=chunk)[263](index=263&type=chunk) - US Telecom revenue increased 12.6% to **$122.3 million**, driven by FirstNet construction revenue and growth in Fixed services, including Connect America Fund support[264](index=264&type=chunk) - Renewable Energy operating loss increased to **$23.7 million** from $0.7 million, primarily due to a **$21.5 million loss** recorded on the Vibrant Transaction[265](index=265&type=chunk) [Results of Operations: 2019 vs. 2018](index=54&type=section&id=Results%20of%20Operations:%20Years%20Ended%20December%2031,%202019%20and%202018) Revenue fell 2.8% in 2019, while operating income dropped 78.1% due to prior-year asset sale gains Consolidated Results of Operations (2019 vs. 2018, in thousands) | Line Item | 2019 | 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | **$438,722** | **$451,207** | **$(12,485)** | **(2.8)%** | | **Income from operations** | **$13,377** | **$61,023** | **$(47,646)** | **(78.1)%** | | **Net (Loss) Income Attributable to ATN Stockholders** | **$(10,806)** | **$19,815** | **$(30,621)** | **(154.5)%** | - US Telecom operating income decreased by **$28.7 million**, largely because 2018 results included a **$15.2 million gain** on the sale of cell sites[322](index=322&type=chunk)[324](index=324&type=chunk) - Renewable Energy segment results swung from a **$13.4 million operating income** in 2018 to a **$7.2 million operating loss** in 2019, impacted by a prior-year asset sale and a current-year goodwill impairment[326](index=326&type=chunk)[325](index=325&type=chunk) - International Telecom operating income increased 4.2% to **$46.9 million**, as increased broadband revenues offset the absence of **$15.5 million** in non-recurring USF funding received in 2018[320](index=320&type=chunk)[321](index=321&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with $105.0 million in cash and significant availability under its credit facilities - As of Dec 31, 2020, the company had **$105.0 million** in cash, cash equivalents, and restricted cash[361](index=361&type=chunk) - Net cash provided by operating activities was **$86.3 million** for the year ended Dec 31, 2020[371](index=371&type=chunk) Capital Expenditures by Segment (in thousands) | Segment | 2020 | 2019 | | :--- | :--- | :--- | | International Telecom | $38,895 | $42,029 | | US Telecom | $29,883 | $17,490 | | Renewable Energy | $2,932 | $6,448 | | Corporate and Other | $3,613 | $6,758 | | **Total** | **$75,323** | **$72,725** | - The company has a **$200 million** revolving credit facility with **$184.0 million** of availability as of year-end 2020, and a separate **$75 million** receivables credit facility for the FirstNet project[372](index=372&type=chunk)[375](index=375&type=chunk)[377](index=377&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from foreign currency fluctuations and interest rate changes - The company's primary market risks are **foreign currency translation** (mainly Guyana Dollar) and **interest rate sensitivity**[400](index=400&type=chunk) - As of Dec 31, 2020, the company had **$6.1 million of variable rate debt** outstanding, with management believing a 10% interest rate change would have an immaterial impact[402](index=402&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[404](index=404&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2020, based on the COSO framework[407](index=407&type=chunk) [Other Information](index=71&type=section&id=Item%209B.%20Other%20Information) A subsidiary was not in compliance with a loan covenant for 2020 but subsequently received a waiver - The company was not in compliance with the **Net Leverage Ratio covenant** for its Viya Debt for the year ending December 31, 2020[409](index=409&type=chunk) - A **waiver** for the non-compliance was received from the lender, RTFC, on February 25, 2021[409](index=409&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=72&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) This section provides information on the company's leadership team and board, with details incorporated by reference - Information regarding directors, executive compensation, security ownership, and certain relationships is incorporated by reference from the registrant's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders[425](index=425&type=chunk)[426](index=426&type=chunk) Executive Officers as of March 1, 2021 | Name | Position | | :--- | :--- | | Michael T. Prior | Chairman, President, Chief Executive Officer, and Director | | Justin D. Benincasa | Chief Financial Officer | | Brad Martin | Executive Vice President, Business Operations | | Mary Mabey | Senior Vice President, General Counsel and Secretary | [Executive Compensation](index=74&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information required by this Item will be set forth in the 2021 Proxy Statement and is incorporated herein by reference[426](index=426&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=74&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information required by this Item will be set forth in the 2021 Proxy Statement and is incorporated herein by reference[426](index=426&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information required by this Item will be set forth in the 2021 Proxy Statement and is incorporated herein by reference[426](index=426&type=chunk) [Principal Accountant Fees and Services](index=74&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's 2021 Proxy Statement - Information required by this Item will be set forth in the 2021 Proxy Statement and is incorporated herein by reference[426](index=426&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=75&type=section&id=Item%2015.%20Exhibits,%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the report - This section contains the Index to Consolidated Financial Statements and Schedule II (Valuation and Qualifying Accounts)[428](index=428&type=chunk) - A detailed list of exhibits is provided, including major agreements such as the Alaska Communications merger agreement (Ex. 2.4), the FirstNet Network Build and Maintenance Agreement (Ex. 10.25), and various credit facilities[429](index=429&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk) [Form 10-K Summary](index=78&type=section&id=Item%2016.%20Form%2010-K%20Summary) None - None[434](index=434&type=chunk) Financial Statements [Consolidated Balance Sheets](index=84&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $1.08 billion in 2020, driven by lower cash and net fixed assets Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $103,925 | $161,287 | | Net fixed assets | $536,462 | $605,581 | | Goodwill | $60,691 | $60,691 | | **Total assets** | **$1,083,711** | **$1,130,726** | | Long-term debt (incl. current) | $72,823 | $86,426 | | **Total liabilities** | **$329,375** | **$324,643** | | **Total ATN stockholders' equity** | **$645,649** | **$676,122** | [Consolidated Income Statements](index=85&type=section&id=Consolidated%20Income%20Statements) The company reported a net loss of $14.1 million in 2020, an increase from the $10.8 million loss in 2019 Consolidated Income Statement Summary (in thousands) | Line Item | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenue | $455,444 | $438,722 | $451,207 | | Income from operations | $9,180 | $13,377 | $61,023 | | Net income (loss) | $(708) | $1,967 | $34,872 | | Net (loss) income attributable to ATN Stockholders | $(14,122) | $(10,806) | $19,815 | | Diluted EPS | $(0.89) | $(0.68) | $1.24 | [Consolidated Statements of Cash Flows](index=88&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash from operations was $86.3 million in 2020, while total cash decreased by $57.4 million for the year Summary of Cash Flows (in thousands) | Activity | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $86,284 | $87,903 | $115,865 | | Net cash used in investing activities | $(70,198) | $(88,262) | $(87,319) | | Net cash used in financing activities | $(73,367) | $(29,908) | $(55,230) | | **Net change in cash** | **$(57,361)** | **$(30,549)** | **$(26,983)** | [Notes to Consolidated Financial Statements](index=89&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, dispositions, goodwill testing, government grants, and legal contingencies [Note 6: Dispositions and Platform Investments](index=110&type=section&id=Note%206.%20Dispositions%20and%20Platform%20Investments) The company sold a majority stake in its Indian solar business and announced the pending acquisition of Alaska Communications - Agreed to sell **67% of its Indian solar business** (Vibrant) in November 2020, reporting a **loss of $21.5 million** on the transaction for the year ended Dec 31, 2020[591](index=591&type=chunk) - Announced the pending acquisition of Alaska Communications for approximately **$340 million**, where ATN will own **51%**[595](index=595&type=chunk) [Note 8: Goodwill and Intangible Assets](index=112&type=section&id=Note%208.%20Goodwill%20and%20Intangible%20Assets) The Viya reporting unit's goodwill was close to impairment, while the Renewable Energy segment's goodwill was impaired in 2019 - The 2020 goodwill impairment test for the Viya reporting unit showed its fair value exceeded its carrying value by approximately **9%**, with a goodwill balance of **$20.6 million**[603](index=603&type=chunk) - In 2019, the company recorded a goodwill impairment of **$3.3 million** in the Renewable Energy segment, reducing its goodwill to zero[604](index=604&type=chunk) [Note 10: Government Grants](index=116&type=section&id=Note%2010.%20Government%20Grants) The company receives significant government funding, including USF, CAF, and CARES Act support for its US operations Government Funding Recognized as Revenue (in millions) | Program | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | High Cost Support (Viya) | $16.4 | $16.4 | $16.5 | | Connect America Fund II | $7.6 | $5.3 | - | | E-Rate, Lifeline, etc. | $10.0 | $6.1 | $8.2 | - Received **$16.3 million in CARES Act funding** in Q4 2020, which was used for network construction and recorded as a reduction to property, plant and equipment[633](index=633&type=chunk) - Was a winning bidder in the CBRS auction for PALs licenses costing approximately **$20.4 million**[636](index=636&type=chunk) [Note 14: Commitments and Contingencies](index=129&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company faces significant contingencies related to its Guyana subsidiary's license and tax disputes - The Government of Guyana formally implemented legislation on October 5, 2020, that introduces competition and impacts GTT's former exclusive license[697](index=697&type=chunk) - GTT is involved in tax disputes with the Guyana Revenue Authority totaling **$44.1 million** and has accrued **$5.0 million** for these matters as of Dec 31, 2020[704](index=704&type=chunk) - The company has future minimum payment commitments under non-cancellable contracts totaling **$63.7 million**[706](index=706&type=chunk)[707](index=707&type=chunk)

ATN International, Inc. (NASDAQ:ATNI) Q4 2020 Earnings Conference Call February 24, 2021 9:30 AM ET Company Participants Justin Benincasa - CFO Michael Prior - President, CEO & Chairman Conference Call Participants Richard Prentiss - Raymond James & Associates Gregory Burns - Sidoti & Company Hamed Khorsand - BWS Financial Operator Ladies and gentlemen, thank you for standing by and welcome to the ATN International Fourth Quarter Earnings and 2020 Conference Call and Webcast. [Operator Instructions]. I woul ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | --- | |-----------------------------------------------------------------------------------------------------------------------------|--------------- ...

ATN International, Inc. (NASDAQ:ATNI) Q3 2020 Earnings Conference Call October 29, 2020 11:00 AM ET Company Participants Michael Prior - Chief Executive Officer Justin Benincasa - Chief Financial Officer Conference Call Participants Ric Prentiss - Raymond James Greg Burns - Sidoti Allen Klee - National Securities Hamed Khorsand - BWS Allen Klee - National Securities Operator Thank you all for standing by and welcome to the ATN International Q3 2020 Earnings Conference Call and Webcast. I’ll now hand the cal ...