Good morning. My name is Sia, and I will be the conference operator today. At this time, I would like to welcome everyone to the ATN International Q1 2021 Earnings Conference Call and Webcast. [Operator Instructions] At this time, I would like to turn the conference over to Justin Benincasa, Chief Financial Officer. Please go ahead, sir.

Great. Thank you, everyone, and good morning, and thanks for joining us on our call to review our first quarter 2021 results. With me here is Michael Prior, ATN's Chief Executive Officer. And during the call, I'll cover the relevant financial information and Michael will provide an update on the business and outlook. Before I turn the call over to Michael for his comments, I'd like to point out that this call and our press release contain forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operating results, and are subject to risks and uncertainties that could cause actual results to differ materially from those described. Also in an effort to provide useful information to investors, our comments today include non-GAAP financial measures. For details on these measures and reconciliation to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, we would refer you to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC. And I'll turn it over to Michael for his comments.

Okay. Thank you, Justin. Good morning, all. So this quarter was largely in line with the trends and expectations we discussed just 2 months ago. Our most important revenue drivers in International Telecom, broadband and mobile subscriber levels continued to show strength, even as we await economic activity recovery from pandemic restrictions. However, the quarter showed we have some more work to do on the cost side of the equation. And as expected, activity and related expense has picked up in several areas of our U.S. Telecom operations, particularly the first net build and other infrastructure builds, and private network development efforts. Meanwhile, the Alaska Communications acquisition, which we announced at the start of the quarter, continues to move promisingly towards close. And the partial exit from our Indian renewable energy business was completed in January, freeing up resources to focus on communication services businesses closer to home. Now I'll turn to some more detail on the individual operating segments, starting with International Telecom. Fixed data subscribers in this segment increased by about 9% year-on-year as we continue to see growth in this base every quarter. Our past and ongoing investments in our network and service quality have enabled us to capture underlying demand. Mobile subscribers also increased by 9% year-on-year. This was the third consecutive quarter of good growth in this metric. And as you can see in the information in our press release, we saw year-on-year growth in both post-paid and pre-paid subscribers. We credit better retail and marketing strategies for these share gains. Video subscribers continue to decline though with some recent signs of leveling off and voice subscribers remained steady. Expenses rose faster than revenue for this segment year-on-year. While some of that was new regulatory fees and some of it more a one-time in nature,…

Great. Thanks, Michael. For the quarter, total consolidated revenues were $124.5 million, up 12% from last year's reported total of a $110.9 million. $12.3 million of the revenue increase was associated with the FirstNet construction project and the remainder represented a modest uptick in revenue in the international segment. Consolidated adjusted EBITDA for the quarter was $24.7 million versus $29.9 million in the first quarter of 2020, and I'll speak more about that decrease in a moment. I wanted to note that we slightly restructured the presentation of our operating expenses on our consolidated P&L to better align with industry standards and in preparation for the consolidation of Alaska Communications when the acquisition closes. We're now combining termination and access fees with engineering and operations into cost of services in putting together our sales, marketing, customer service and general administrative expenses in -- to form selling and general and administrative costs. Looking at each of the segments and starting with International Telecom. Revenues were $83.8 million, up from $82.3 million last year, and adjusted EBITDA was $26.9 million compared to $27.8 million. As Michael mentioned, segment revenues benefited from broadband and mobile subscribers growth in several markets, but we did incur higher operating expenses in the quarter, which led to a modest decline in adjusted EBITDA. We also took advantage of the opportunity to purchase additional shares in our One Communications subsidiary, which is our Bermuda and Cayman Island company, this quarter and now own approximately 77% of the outstanding equity. Capital expenditures in the quarter were $10.5 million for the segment. In the U.S. Telecom segment, revenues were $40.3 million for the quarter, up from $27.3 million a year ago. And as I noted earlier, this includes $12.3 million of construction revenue related to the FirstNet project. As a…

[Operator Instructions] And the first question will come from Ric Prentiss with Raymond James.

First, thanks for giving the International EBITDA percent ownership, that does help. So I appreciate that number on the press release. Talking about regulatory stuff, obviously, a lot going on. Can you expand a little bit about where you see the infrastructure bill headed and what it might mean for you guys? But also the EBB, the Emergency Broadband Benefit, is there anything there that might be applicable for you guys?

I think, yes, to the last. I don't have more details to speak about, but we're looking at that closely. We're looking at all the programs. I mean, it's not 100% clear where this infrastructure bill lands. We do think there's bipartisan support for communications infrastructure builds. But there's -- you probably know this well, but there is some question about how does it relate to existing programs, for example, the second part of RDOF, does that get rolled in. But what we look at -- and by the way, it's not just federal, it can be federal direct. It could be federal through the states, and it can be some state funding. But we are -- we look at the amounts that are being talked about and they dwarf even the rural digital opportunity fund. So they're obviously significant. And we have a history of participating in these programs and looking at them carefully. We are identifying areas where we think we can help. And for us, a lot of it is that could -- bringing in the key infrastructure. So I mentioned the middle mile fiber builds. We have just completed one and we have just a couple of others ongoing. And those are typically driven by things like bringing fiber some considerable distance into light up a school district in an area. And then we've obviously tried to route it and make it work for all users in the area. So I think there's a lot of infrastructure still needs to be built and we're hoping to participate in that.

Any thoughts of how long the timing takes to kind of shake out this? D.C. is always a tough one to peg that way, but any thoughts about how long it takes to bake this cake?

Again, the sort of more pure infrastructure side of things, obviously transportation, infrastructure and things like that as well as communications infrastructure seems to have a lot of support from both sides of the aisle, from all the people we speak to on the hill. And so I think -- I mean, who knows, I can't predict whether there's something that's tiny, is that right, because there is definitely a difference on the larger bill. But there seems to be a lot of folks who are pushing to solve the digital infrastructure because the pandemic made it really accentuated the differences between has and has-nots in terms of communities, for distance learning, for all sorts of things. So I'm some -- I'm pretty optimistic that it gets resolved in the next couple of months in terms of there's an agreement about the way forward. Now it will take a little longer, probably undoubtedly to roll out the program and figure out how to install safeguards.

Right. Okay. And as you think about Alaska coming on board hopefully, how does your early view of that fit into infrastructure bill, EBB opportunities there as well?

For sure. I mean, there are significant opportunities there. And one of the things we hope to do is to give the team there the resources to pursue those things more proactively than in the past. And there's no doubt there is going to be -- in our minds, that there's going to be builds there and there'll be opportunities that we think we can participate in that will make sense for us.

Okay. And on Alaska, you mentioned now kind of middle '21, couple of months hopefully we get through the process. As you think about a closing time line, I know T-Mobile historically likes to always close something on the first of the month, the first or second month of a quarter, doesn't like to do intermonth, doesn't like to do third month of the quarter. As you think about when Alaska might close, would you close it on any day like let's get going on this? Or how should we think about timing, potential closing?

I mean, my general attitude is the get or done attitude. But we have -- Justin, do you want to add on that?

Yes, just addition on…

Deal is kind of 4 days from approval. So we kind of -- I'm not sure we can steer it as much on that. But I think our general approach is…

Yes, we close when you can close.

And I think we're ready. I mean, we've done this before. And I think we're ready to do it and the teams have been -- this is not like a lot of sort of private deals in the nature and -- or overlapping competitive situations where you have antitrust issues. I mean, we have ability to really work those details ahead of time and be ready.

Great. And you touched on private networks a couple of times. Can you help us understand sizing, timing, winning of kind of private network transactions and what it might mean to your business? And I assume CBRS fits into this as well.

I missed the first part. Ric, can you repeat the question?

Yes. So you've mentioned private networks a couple of times. Can you help us kind of size what you think the addressable market is, the timing of approaching in that market? When it's going to take to win? Just to kind of help think about what the magnitude of what you're looking at might mean for you guys.

Yes. I don't want to cite the total addressable market. There's big numbers out there all over the place, depending on how you measure it. But I think it's very -- the size that we're going after is more than material to us if we're successful. So it could be significant area. And we are -- what we've been doing on private networks more and more is pursuing sort of a partner -- channel partner strategy rather than what you would have seen in a lot of other areas, including DAS, where it's kind of onesie, twosie builds. Instead, we are partnering with other providers of the whole technology solution around private networks and edge compute, and looking to do that across many different segments. We're obviously pursuing the municipal, state and local education. And there's other verticals where we've got partners and talks to go forward. So it could -- I think, again, I can't really give you a total addressable market at this time, except it's substantial opportunity if we're able to execute on it and position ourselves as one of the leaders. And -- but it's still early. It's still early in the sense that even other folks we've spoken to, including potential competitors that are backed by private equity firms we know, everybody thought 2020 was pretty slow in this sector and is expecting it to pick up. And we see some signs of that. But we definitely see some signs of that, but there's still more to go. So that's really the best I can do for you now.

The next question will come from Greg Burns with Sidoti Company.

Just want to follow-up on that last comment around seeing some positive signs on the private network business. Can you maybe just give us a sense of -- or maybe a little bit more color on what those signs are or what the pipeline looks like? Is it growing? Are the conversations getting more positive or constructive with customers? Just what do you see that gives you the confidence in that part of the business?

It's really the -- it's really mainly the channel partner side that I spoke to before, Greg. So it's -- we are in discussions with some very big players who have ambitions around solutions across a lot of real estate, if you will. And I think we're very encouraged by what people see and the value we bring to the solution with sort of the -- an overarching network platform to be used as part of that. And so I think what gives me the optimism is the types of partners we're speaking to our prospective partners are those who aren't doing this in a small way. And for them, much bigger companies than us looking for major solutions. So -- and nobody -- all -- people don't devote those resources, all the other partners, potential partners don't devote those resources and prospective customers unless they think this is coming. So those are the sort of tea leaves we're reading.

Okay. What percent of your international EBITDA does the One Communications subsidiary contribute?

Yes. We don't break it out, Greg. But it's a -- they're all very substantial portion of it. There's not -- they're all important to that segment. We don't really break that piece out.

Okay. And then, has there been any change in the -- I know there was a change in the FCC support that you're getting in the U.S. Virgin Islands. Is there any change in the status of that?

No, no. Still ongoing discussions and waiting to see what's next.

Okay. But that hasn't -- you're still receiving -- that change hasn't -- wasn't reflected in this quarter's results?

No. No. No.

Okay. Any time line on when some final decision or might be made where that will start to impact the P&L?

There are several layers of decisions that need to be made, and we're in discussions about that. So I mean, I think some decisions will be made certainly in next few months, maybe this quarter, but there's -- I don't want to get into the details of the conversations, but we're -- I expect it to develop and an outcome and time lines to be clear in the next quarter or so.

The next question will come from Hamed Khorsand with BWS Financial.

First question I have was on the private network side, Geoverse, are you actually generating revenue at this point? Or is it still in development stage? And how far along do you think they'll be before generating positive free cash flow from that business?

Hamed, we are generating revenue, but it's -- the prospective revenue, what we're chasing is much bigger than the current generated revenue. And when we're pursuing it, we're -- we -- our focus is on overall contract pipeline, building multiyear contracts of revenues and positioning. So -- and in terms of free cash flow, we certainly don't expect it this year. In a way, if this is successful, that could prolong in the near term the negative free cash flow as we continue to work for that growth. So certainly not expecting that this year, for example.

Okay. And then on the cost-cutting comments, is that related to being in preparation for the Alaska Communications purchase? Or is that purely separate because something has just fallen out of the lap for the moment?

I was really speaking mainly to the International Telecom area. So we have some initiatives that already were in play that are not moving as fast as we would like and we're looking to identify additional areas.

[Operator Instructions] We do have a follow-up from Ric Prentiss with Raymond James.

A couple of follow-ups if I could. Justin, you were talking about the CapEx in the U.S. and how the $14.9 million includes about $6.2 million reimbursable. What's the time frame of how that gets reimbursed? And how will you report that? Will you report it as a net CapEx? Or how should we think about that, the comments -- ?

Yes. No, that's why I brought it up, Ric, because we can't report as a net CapEx. So it kind of end -- and what I would say is some of it's already been received and then now spent, and some of it's still to come. So what we're trying to do is, in our statement of cash flows is show what CapEx spending that either we have received or going to receive. But the receipt of the money is kind of somewhere else within the statement of cash flow. So I wanted to try to net them, but cons wouldn't let me. So that's why you'll keep bringing it up on what the number is. So.

And I appreciate that. Shakespeare sort of set accounts instead of lawyers. On FirstNet, I think I heard you say 50, 5-0% incremental to get to $85 million, but I thought I heard in the -- or read your press release that you're going from 30% to 65% by the end of the year?

Yes. So we did about 15% last year. We'll do another 50% this year. So -- and we -- that's -- and yes -- and we had in the press release. We had a little bit more in the first quarter than a quarter of 50, call it. But it's generally, by the end of the year, we'll be 65% done is the ballpark.

Got you. That makes sense. Yes, because -- yes. Okay. And then still finish by end of 2Q '22?

Yes, yes. That's still the rough -- yes, midyear kind of thing, tough. Yes.

Okay. And was not any explicit guidance in the press release? Previously, you've given some CapEx guidance. Obviously, Alaska you used to give a lot of guidance. How should we think about guidance based on the Alaska deal around the corner here and what you might do going forward?

I mean, we still -- we're always hesitant to give a lot of P&L guidance, right? But I think we will help people with what Alaska means, although they're public, right, so that you can get a lot of that. We will definitely guide on CapEx. And I didn't refresh anything on CapEx. We just kind of gave that guidance a couple of months ago. So we're still anticipating what we said at year-end. So -- but I think we -- you should expect at least some CapEx guidance and -- coming out in addition to the other segments from Alaska.

And I think, Ric, we'll also -- we're also expecting next quarter should be good timing for it to talk in more detail about the plans and expectations for ACS.

Okay. That makes sense. And how should we think about the tax implication? You mentioned the effective tax rate in the quarter. What does Alaska do to cash taxes as well as book taxes?

Actually, on a cash tax basis, Alaska helps us because there's some NOLs there. And I would say, on a consolidated basis, we're kind of -- if you look at 2021, we'd be slightly above where we were this quarter, right, at the 6%. So we're thinking we're still in that 6% to 10% range on effective tax rate through the P&L. But I think from a cash tax standpoint, it's -- it will be beneficial to us because.

Yes, makes sense. One other one I thought of. Do you report how much of the CapEx was FirstNet?

Given that -- we've kind of said in the initial guidance, right. We said that U.S. was -- I think it was 40% to 50% or 45% to 50%. The bulk of that is the FirstNet. And it's -- in what -- by first -- and that's like call it $25 million, $30 million of it is FirstNet. And that is associated with infrastructure like towers, backhaul that we will own at the end of the day. So because sometimes you get confusing with the sites we're actually building and turning over to AT&T, not our CapEx. That's their CapEx, but we're building it. That CapEx is towers and backhaul that we keep. And so, it's a big.

Right. And if you report it out as far as the actuals -- yes, it's a big chunk. Are you reporting out kind of how much you spent in 4Q last year, how much you spent in 1Q this year that was "FirstNet"? That's kind of obviously above all versus what would be a more traditional kind of spend.

Yes. No. I think, yes, that's a good point. We probably could do some of that.

And at this time, there are no further questions. I'd like to turn the conference back over to management for any closing remarks.

No closing remarks, everybody. Thanks for joining and we'll see you in a quarter.

Ladies and gentlemen, thank you for participating in today's conference call. You may all disconnect.