Good day, and thank you for standing by. Welcome to the ATN International First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to your speaker today. Casa, please begin.

Thank you, operator, and good morning, everyone. Today, we'll be reviewing our first quarter 2022 earnings results. With me here is Michael Prior, ATN's Chief Executive Officer. Michael will provide an update on our business and strategy as well as high-level overview of our quarterly results. I'll cover the relevant financial information and provide additional color where necessary. As a reminder, we released our first quarter earnings press release last night after market close. And investors can find the release and summary slides on our Investor Relations website. Before I turn the call over to Michael, I'd like to point out that this call, our press release and slides contain forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operating results. These statements 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 detail on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC. And I'll turn the call now over to Michael.

Thank you, Justin. And welcome, everyone, to our first quarter 2022 earnings call. ATN has entered a new growth phase, a phase marked by fiber and other advanced data network infrastructure for more homes, businesses, schools, communities and even other communications providers. The networks we are building around the world today will have lasting impacts, both for the communities we serve, as well as for our business. And as an example of the importance and the opportunity in this work, I'd like to start off by sharing some comments from our customer the Northeast Arctic School Board in Alaska explaining their situation. "We are located in the remote Yukon Delta region of Alaska. There is no infrastructure. Our region lacks even basic Internet access. The region has high poverty. And the only reliable Internet connections are to the school and the health clinic, if there is a clinic in the village. In some places, you cannot buy a home use Internet connection at all. Access to the Internet is always a main concern for parents. It is very hard to conduct remote learning when none of the students have an Internet connection." At ATN, we deliver connectivity. And for many, as in this example, that means access to life-changing services such as telehealth, online education, remote employment and more. Through these services, the lives of previously isolated people can be transformed. As mentioned on our last quarterly call, our new growth strategy is characterized by two key components to drive progress and serve our mission of digitally empowering people and communities so that they can connect with the world and prosper. The first component of this strategy is what we call glass and steel. At its core, glass and steel means building core digital infrastructure such as fiber, towers and…

Thank you, Michael. I'll now provide a closer look at our financial results for the first quarter of 2022. In the first quarter, total consolidated revenues were $172 million, up 38% year-over-year, largely due to the Alaska Communications contribution. Operating income was slightly above breakeven, while adjusted EBITDA increased to $40.6 million from $24.7 million a year ago. The year-over-year decline in operating income for the company was mainly due to the $3.4 million of one-time losses on the disposal of assets in both our domestic and international segments. Turning to our segment breakdown. In international, we increased revenue by 4% year-over-year to $86.8 million. This was mainly driven by mobile subscriber growth and increased roaming or carrier service revenue as travel and tourism is returning to the US Virgin Islands and Bermuda. These gains were offset by the decline in federal high-cost support subsidies that started in the third quarter of last year. Adjusted EBITDA was $27.1 million in the quarter, up slightly from $26.9 million a year ago. Offsetting the revenue growth, we saw expenses returned to pre-pandemic levels, along with investment in brand positioning and subscriber growth in conjunction with our fiber and mobile network investments. In the US segment, our top line revenues were $85.2 million in the quarter, more than doubling once again on a year-over-year basis. This strong performance continued to be driven by our consolidation of Alaska's results. Approximately 75% of the segment revenues, excluding construction, were derived from businesses and carrier services. FirstNet construction also contributed $2 million to the segment revenues. Timing of site completion in any quarter can be hard to predict, particularly in the winter months. But the lower number of sites completed this quarter moved us to just over 60%. And we continue to expect to reach 90%…

Thanks, Justin. We are currently in a new growth stage here at ATN and very excited about the future. By targeting those markets early on that are well-suited to our unique skill set, we are setting ourselves up for lasting growth and outsized performance. At the same time, we are upgrading our tools, networks and services to deliver best-in-class digital infrastructure and communication services. Through this process, we are unlocking value for our shareholders, as well as the communities we serve. And now operator, we'd like to open it up for questions.

[Operator Instructions] Our first question will come from the line of Ric Prentiss from Raymond James. Your line is open.

Thanks. Morning,

Good morning, Ric.

A couple of questions. First, Michael, you called out some seasonality with Alaska, new acquisition for us at least with you guys owning it. Can you help us understand kind of how much seasonality there is or what we should expect the kind of ebb and flow to be where in dollars or percent kind of business?

Yeah. It's not really the sort of - first of all it's not a huge factor. But typically, the main point is the fourth quarter tends to be a strong quarter. So it's not as much up and down throughout the year, but the fourth quarter tends to be a strong quarter.

Got you. And so as I look at the results from the fourth quarter, managed services line item was pretty strong at almost $8 million, and then it drops down to $2 million in 1Q. Is that mostly driven by that seasonality in Alaska? And how should we think about that playing out throughout the year, particularly managed services since that's kind of a new line item for you guys?

Yeah, Ric, I can take that. The managed services in the - some of that is equipment sales, that happened in the fourth quarter. And there does tend to be - I don't know if it's seasonality. But there does tend to be more of that type of stuff in that market in the fourth quarter. But that difference in the quarter was mostly equipment sales that also come with higher COGS, too, right, cost to offset.

So yes, we noticed revenues were lower than we were looking for, but the EBITDA wasn't as bad. So obviously, that would play into that.

Yeah. And I think some of that is driven by just like buyers tend to do a lot in the fourth quarter before the year-end.

Year-end budget spending will lose it, yes.

You got it. You got it.

Okay. And then as we look at the carrier services line, it also had a big fourth quarter then dropped off in 1Q. Is 1Q more of a normal level that we should be thinking of that it grows off of that? I'm just trying to think through the - again, with Alaska just being in there and you had a big fourth quarter. But we're just trying to - how it models going forward?

Yeah. I think that's directionally right, Ric, so the last part. So the first quarter, you should think of that more of that as the normal and growth off of that.

Got you. Okay. A couple of other quick ones for me. You did mention some divestitures, both domestic and internationally. Can you share with us any extra details and I think we did see some industry items about Geoverse may be shutting down?

I can take the first part. The biggest component of that was a de-commission of a billing system in the US and a fiber contract basically redo in the international market.

Okay…

And Ric, I'll take the second part. On Geoverse, it's just - it was not material to the quarter, but we really reduced funding. It is not shut down. We were still operating for customers. But it's really become immaterial to the current or outlook numbers.

Okay. And last one for me then. Any updated thoughts on infrastructure spending, infrastructure bills, federal to state accounting to local kind of how that plays out on the regulatory front or the legislative front?

Yeah. I mean the main thing is we continue to be active in that sphere. So we're continuing to look in multiple markets in the US, our areas, our operating areas, principally at expansion possibilities with the assistance of federal or state programs. So we have applications in for a number of things, and we continue to monitor it. There's still money flowing from some of the earlier sort of pandemic relief and some of the other funding bills have passed. But the bead program, the $40 something billion has not started flow. And we expect that to go through the states, through the states and local programs. But we're very active, and we do see it as a way for us to connect to more communities, to augment services in a lot of these areas. And so it's definitely a focus point.

Okay, thanks.

And our next question will come from the line of Greg Burns from Sidoti. You may begin.

Good morning. I just wanted to follow up on that Geoverse line of questioning. I think maybe a year ago or at some point, you had set guidance and you talked about the incremental spending on - for Geoverse something like 10 - I think the number was like $10 or so million. So was Signet like meaningful incremental spend that was impacting EBITDA in that segment? So I'm just trying to understand why if we're kind of winding it down to some degree here, why there's not like a commensurate upside to profitability if we're reducing spending on that business?

Yeah. Sure, Greg, it's a good question. It is built in to our outlook that reduced spending. So there are other puts and takes in the US Telecom segment. Some of the decline in the legacy wholesale revenues, of course impacting that. So that's really what's going on.

Okay. And then in the international segment, it looks like churn has been going up on the wireless side. So how are you balancing cost of acquisition versus lifetime value of these subscribers? And is there anything specific that's driving that increased churn? Thanks.

Yeah. We're not particularly - I mean, we watch churn carefully. It is very important. We're not particularly concerned about that. That really relates in this quarter, really relates to a lot of seasonal promotions from late last year, which net-net, we still think was good to do. So in the - in some of our markets, particularly the sort of the prepaid segment, those promotions, you can have a sort of correction back a little bit in the following quarters. But the net of the activities we've done, we like the economics around it.

Okay. Thank you.

Sure.

[Operator Instructions] Our next question will come from the line of Hamed Khorsand from BWS Financial. Your line is open.

Hi. I just want to ask you about the fiber space and how you're going about with the grants and so forth that are pending. How competitive is it for you in that environment since everyone's chasing these grants? And how can you solidify that you're not really going to be facing competition in the markets that you're targeting?

Yeah, that question a lot of the operators are asking, right? Because there's a lot of people talking about it. There's a lot of money going into these areas. So the first thing I would say is the areas where we have expertise and know how and really can cost out and credibly execute on builds there's limited other players that can do the same. Having said that, we have to be very disciplined about it. We have to really understand our costs and not do something that's not going to be economically viable. So there's more to come, right? As I mentioned before, there's a lot more money coming, and so that could get more competitive. But we really do it project-by-project. And the things we've done today are pretty complex, right? So they're not sort of commodity-like auction situations. They're pretty complex. They involve working with local partners, school systems and often things like state departments of transportation. And because permitting is always a key ingredient to these things, timing and costing. So I think it's manageable, but we'll keep our eye on it and we'll be disciplined.

Okay. And on the international side, are you seeing increased competition in Guyana right now? Or have you been able to manage that with the increased marketing spend?

There's definitely increased competition over, say, three or five years ago, as we talked about a year or two ago, the liberalization sort of changed some of the market licensing introduced, you know, existing players, local players expanding. But I think we're doing very well competitively there. So we feel good about it. Most of - we think most of the competitive impacts we've had on a sort of net basis were last year, a year before. But it's going to continue to be competitive and we'll continue to fight for share throughout. But again, on a sort of overall assessment, we like our chances for continuing to grow there.

Okay, great. Thank you.

Yeah.

And we have a follow-up from the line of Ric Prentiss from Raymond James. Your line is open.

Hey, guys. The busy earnings season, but I would be remiss if we didn't ask the inflation interest rate questions. How are you seeing inflation affect you in your different markets, both on the revenue and the cost side? And then, how about on the interest rate side, how is it affecting you?

I'll take the cost side and Justin can talk more about it. So I guess we know it's not transitory. That's the first thing. We're definitely seeing it. We're seeing it in a number of areas. We're seeing particular areas to call out or sort of specialized contracted services. A lot of operators are seeing that in the US., in particular, on certain materials and so on. So it's - the impacts are there, right? You see our results. So they're reflecting the results. And for the most part, I think we've been able to handle it. And we also - but we also have to look at and are looking at passing more of those costs along to our customers where it can be born, we need to do that. Now we start to do that in some places, but I think we'll probably do it in more. And the good news is we operate and deliver essential services. So you have some ability to continue to be reasonable in having your customer share in the inflationary effects.

And we are seeing - Ric, we are seeing interest rate increases, obviously, alongside everybody else. And we do have some hedges in place. But for the most part, we're seeing that impact as well.

Okay. And on the competitive front, probably on Hamed's question, on competitive environment out there, any - as you look at your fiber under glass and steel side, the fiber side, what kind of competitive responses, is cable in the neighborhood where you guys are building? And what kind of competitive responses are you seeing or are you expecting?

Well, I think if you think about it on the domestic side, what we've largely been doing to date has been enterprise wholesale community connection. So when we bring fiber to a new community or an area, there's nothing really there on the high-speed data thing. So it's not - we're not very typically in an overbuild situation of an existing high-speed provider. There'll be some of that in Alaska. But I think you can see from many, many markets that there's a way to do that from in a viable way and an economic way. And then outside the US, it's typically us and one other player battling it out in most of our markets. And - but in most of the markets, we were the first to fiber if you think of that other component in terms of - and if you look at that as the first to provide the higher-speed service. And so we see quite low churn. And we see very good customer take-up when we bring fiber to new areas, for example, in Guyana, as we bring fiber into new communities, we are seeing very quick take up. So all in all, I think we're managing it quite well.

Okay. And on the satellite side, you referenced sometimes satellite. You guys had the relationship with OneWeb. Update us a little bit on what you're seeing in the satellite space and how it might help you?

Well, I think Alaska is a unique situation because it's because of OneWeb at least. They have that polar orbit. So they have more capacity there and that's sort of a launch initial area. So we partnered with them early on as a way to provide solutions. And we also see some mix of LEO, low earth orbit, low latency solutions layered in with some geocentric solutions for other types, less time-sensitive aspects of the capacity. So we're looking at those. We haven't really gotten that far in as you go down in the latitudes. But we're constantly looking at that, looking at ways to provide solutions for other communities. I mean we're happy to partner with any provider there. It's pretty straightforward to partner on the satellite thing. It's really - it's a gross margin equation. And so it's easy to analyze, easy to price out. And in some areas, it really is going to be the solution for a little while.

Okay. Thanks for the follow up.

Yeah.

Thanks, Ric.

Thank you. I'm not showing any further questions in the queue. I'll turn the call back over to Michael for any closing remarks.

I don't have any closing remarks. Justin?

We're all set. Thank you, everybody, and we look forward to speaking to you at the end of the second quarter. Have a great spring.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.