Good day, and thank you for standing by. Welcome to the ATN International Q1 2024 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Michele Satrowsky, Corporate Treasurer and Head of Investors. Please go ahead.

Thank you, operator, and good morning, everyone. I'm joined today by Brad Martin, ATN's Chief Executive Officer; and Carlos Doglioli, ATN's Chief Financial Officer. This morning, we'll be reviewing our first quarter 2024 results and providing additional insights on the 2024 outlook. As a reminder, we announced our 2024 first quarter results yesterday afternoon after the market closed. Investors can find the earnings release and conference call slide presentation on our Investor Relations website. Our earnings release and the presentation contain certain forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operations. 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 for investors, our comments today include non-GAAP financial measures. For details 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 the 8-K filing provided to the SEC. And now, I'll turn the call over to Brad.

Thank you, Michele. Good morning, everyone, and thank you for joining us. The ATN team remains focused on advancing our First-to-Fiber and Glass & Steel strategies to enhance our fiber-rich digital infrastructure and next-generation fixed wireless capability, positioning ATN to capture the growing demand for high-quality broadband in the remote and rural markets that we serve. Although we saw growth in key operational metrics year-over-year resulting from the strategy, our first quarter financial results were softer than expected. I'll begin by briefly covering the dynamics from our first quarter and a revised outlook for the year. Then, I'll outline our progress executing our strategy before turning the call over to Carlos to review our first quarter financials and revised 2024 guidance in more detail. Starting with our first quarter results. Our first quarter revenue was up 1% and adjusted EBITDA was down 3% versus the prior year quarter. Our U.S. telecom segment performance was impacted by delays in major carrier services projects and weaker than expected business revenue. These dynamics impacted our domestic segment's first quarter results and full year outlook. The U.S. shortfall was partially offset by solid performance in our International segment where revenue and adjusted EBITDA grew 3% respectively, as we grew high-speed broadband services and business customer revenue. Today, we are lowering our guidance to reflect the softer-than-expected first quarter results as well as our current expectations for the balance of the year which has been impacted primarily by 2 factors. First, while now we have line of sight to the U.S. carrier services projects moving ahead, the delayed delivery timing will result in some of the previously forecasted revenue moving out of 2024. Secondly, we secured fewer new business contracts for major government program in the first quarter. We expected a higher win rate and…

Thank you, Brad. Good morning, everyone. As Brad previewed, our first quarter results came in below our expectations. Given the first quarter's performance and our current assessment of market dynamics, we are focused on strengthening our business revenue pipeline and accelerating several cost reduction actions. Today, we're revising our full-year guidance, which I will expand upon in a moment. Turning now to a detailed review of our results, starting with the income statement. In Q1, total company revenue of $186.8 million was up 1% compared with the same period in 2023. Excluding construction revenues, service revenues were flat. There were several puts and takes in the quarter. Across the company, we experienced growth in fixed revenues, which were partially offset by declines in mobility and carrier services revenue. The primary offset to growth related to the delayed delivery of several carrier services projects and soft business revenues in our U.S. telecom segment. Operating income in the first quarter was $4.6 million versus $0.6 million in Q1 of 2023. The increase was due to lower restructuring expenses and reduced depreciation and amortization expenses compared with the prior year. Net loss in Q1 was $6.3 million for a loss of $0.50 per share, which included $1.2 million of restructuring expenses, a $2.5 million year-over-year increase in interest expense and $1.6 million in tax expenses versus a benefit in last year's first quarter. This compares with the prior year's net loss of $5.9 million for a loss of $0.44 per share, which included $2.9 million of restructuring expenses. Adjusted EBITDA for the first quarter was $43.5 million, down 3% from the year ago period, primarily due to a $1.3 million increase in cost of services. Looking now at the segment's performance. Beginning with our International segment, revenues reached $93.1 million at 3% year-over-year.…

Thanks, Carlos. We are committed to managing the business to deliver exceptional value to our shareholders, employees, customers, partners and local communities. There's work to be done in the quarters ahead, but the leadership team and the board believe that we have the right strategy, team and offerings in place to deliver on our plans for 2024. Our enhanced digital footprint offers many exciting possibilities for how we can more expansively serve our customers and deliver durable and profitable growth, cash flow expansion and value creation well into the future. With that, operator, we'd like to open up for questions.

[Operator Instructions] Our first question today comes from Richard Prentiss with Raymond James.

First question I want to probe on, obviously, weak trends in a couple of the spots and delays on projects. When you guys gave or reiterated guidance back in late February, what really changed to make 1Q come in so late? Was it the win rate, or can you help us just elaborate a little further on what changed really in the 2 months from late February to where we're at now? And then what can you tell us about April trends?

So the primary dynamic and the change in the last -- since the last guidance, the area we spoke to around business revenues really in 1 market that were part of a big program to secure some significant contracts. And that dynamic -- that sequence of wins is an annual schedule that's been awarded in late Q1 and early Q2. And really, just we were not able to convert on the win rate that we wanted. We did add some wins incrementally, but it wasn't enough to make up for the gap in our ECF funding.

And then as far as visibility for the rest of the year, Carlos, you mentioned kind of a 60-40 split on EBITDA. But how confident are you on -- and what gives you that confidence kind of to take the guidance to where it is now with the visibility, given the U.S. economy and other items?

Look, in terms of the guidance, we believe that it's an appropriate revision based on the discussions that we've been having with our teams and their updated view on the outlook coming out of Q1.

And on another vein, obviously, the stock's down significantly today. What's the ability to do stock buybacks, but then balancing that with liquidity as well, as you look at kind of how you want to manage the balance sheet and the shareholder returns?

I think at this point, Rick, we continue to have the programs that we currently have. We're executing on them. We're not necessarily at this point putting anything forward different to what we had already established. In terms of how we are managing the business, as we stated in the guidance -- sorry, as we stated on our discussion of the business, it's going to be a combination of continued execution and cost management. And we're going to -- as I say in my remarks, we're going to go after that with an urgency over the coming quarters.

And then, are there any assets that might make sense to sell that you maybe are not getting value for in the public markets or in driving results? Any thoughts on potential asset sales?

So Rick, we don't speak to that, but we obviously look always at the opportunities that are out there to maximize shareholder value.

Our next question comes from Greg Burns with Sidoti.

Could you just further elaborate on the dynamics within the carrier services contracts that got delayed? Are these because of milestones weren't reached soon enough and revenue is being pushed to the right? I just wanted to get a sense of your visibility on that part of the business and maybe timing of when those revenues get realized this year?

So the delays in the contracts were really delivery and construction delays. So some of these were due or impacted by some weather events that happened in Q1 in some of these areas. And some were due to some customer -- some changes in requirements from the customers. None of this is revenue loss. These are just dynamics that move these out to a degree. And the reflected guidance represents a schedule of that revenue move out from '24 to '25.

And then, in terms of the business service revenue trends that you were just discussing there. What was the reason or why do you feel that you were not able to convert this year? Was it just pricing is more competitive, more competition in those markets? What was the main driver of the lower win rate this year?

Look I think it was a range of multiple factors. We were -- we had set up a program to go after a pretty large pipeline. And we had expected a better conversion rate. So I believe it was a multitude of factors, Greg. And the dynamic moving forward is we have an established pipeline. We have much of the '24 guidance includes projects are actually in backlog. There is an opportunity to accelerate. We're working in detail with our markets to accelerate wherever we can to bring circuit delivery in so we can maximize revenue delivery for '24.

And just so I'm clear, these are government contracts that are awarded on an annual basis. These aren't like federal grant funding support programs.

No. These are enterprise contracts, some of which are funded through different government programs. But these are really enterprise programs within our markets.

And then on the wireless side internationally, a little bit of a decline in the prepaid subs. Is there anything going on there in terms of the competitive dynamics within those markets? Why did you see that decline this quarter?

Yes. On the international wireless subs, there is additional competition from smaller 5G entrants in the markets. The movement in sequential quarter really is reflected in Guyana. And we had aggressive holiday campaign in that market. And in the prepaid market, the churn was mostly attributed to folks that didn't top up on those SIMs that moved in the December time frame.

Our next question comes from Hamed Khorsand from BWS Financial.

So first of all, could you just talk about what your plans are as far as what you look and do differently to capture some of the business that's lost, especially on the business side?

Yes. So there are a number of plans and activities in process. And we have a robust pipeline that we built. There is a more standard profile of win rate and customer acquisition rate built into our forecast for 2024. And we are aggressively pursuing. As I mentioned in the previous comment, there is quite a bit of backlog that we just really need to convert over. So there is a -- which impacts multiple segments. But we are aggressively going after an addressable pipeline. We are going after a backlog of construction opportunities to be able to pull in revenues in 2024. So we feel confident in the guidance we've given, and we have a well-risk-adjusted pipeline.

And my question as well is, you're spending a lot of money adding, homes passed and so forth. Then why is that not showing up as far as customers are concerned? I mean, your broadband customers went down sequentially. I mean, it seems like you're just wasting money at this point.

So on that point, right, so we have had very good success in the investments we've made in international markets. And we've shown very good broadband year-over-year sequential growth. A dynamic that is in the numbers for this quarter, there was a significant amount of builds that took place in late '23 and even into early 2024. And those are -- that's a pipeline, an opportunity for ATN or companies to go after and to penetrate. So in our U.S. markets, we mentioned a pretty significant move more recently. So it really is an opportunity. And we have to go execute on the commercial side to fill up that network.

[Operator Instructions] Our next question comes from Robert Beauregard from Global Alpha Capital Management.

Yes. So this is -- clearly, we had discussed when you -- when we last met this stock price and the extreme reaction to what really is a slight downward revision, but nothing broken about the business. You're now selling at 0.7x tangible book. I mean, the market right now is not very kind to small cap illiquid stocks. Are you seriously giving thoughts to just privatizing the company and embarking on a process to create shareholder value? I mean, this is nice to say, but the stock is down from $80 to $20. And clearly, there's something that the market just doesn't have the patience for your building, and the results will come later, your fiber-to-Glass & Steel strategy. I mean, I think at this point, you guys have to conduct, in all fairness to long-term shareholders, to conduct a process to sell the company or privatize it. I'm looking to some kind of commitment that you will look at least and discuss it with the board. That's why I'm on this conference call with other analysts with over 7% of the stock.

Robert, this is Carlos. So we appreciate your comments, obviously, and we'll take that to the Board and discuss it with them.

Like I said, the market is just not kind to small cap. It's nothing ATN. It's the whole small cap complex. I mean, there's tons of money out there with private equity and strategic buyers. And these kind of multiples, a discount to book tangible assets. I mean, you have to consider these options.

Yes. Understood.

Our final question today is from Rick Prentiss with Raymond James.

We were going to ask the private-public question as well, so glad that got asked. I'll take my question then for the follow-up. Brad, can you help us understand operationally then the backlog? What has caused contracts to go into backlog? What will allow them to get out of backlog into producing? Is it weather? Is it construction? Is it supply chain? What exactly has put items into backlog and what specifically will get them out of backlog?

Yes. So Rick, there is a component of weather in the winter months in these markets. We operate in rural Alaska and the Rocky Mountains as well in the U.S. market. So there is a dynamic of coming into the true build season that will enable us more predictability on delivery. And we think there's an opportunity to accelerate. But the dynamics of working with larger carriers and some movements and requirements can always put delays into programs unexpectedly. But we are working diligently. We have a good line of sight on all this backlog. And we do think there's opportunity to pull this backlog in that's reflected in our new guidance. And we'll continue to work very hard to do that.

Is there anything supply chain or labor oriented you're always looking to see. Obviously, we've come out of COVID, but there's still some lingering effects out there. But is there anything specific beside the weather and other items that you'd call out? What's the long pole in the tent that has to be addressed, do you think, the biggest one?

It's a great question. So no, we are not seeing significant impacts on supply delays. It's something that has improved in certain areas. If it has not improved, we've hedged to ensure that we can deliver. So it's really not supply or labor. So again, there are always dynamics with these large programs. And we really need to make sure that when we can influence decisions to move things more quickly, we are influencing those. So we've got a long experience of doing this. We think there is an opportunity to really continue to move this forward. Unfortunately, just the impact of '24, there will be revenue that shifts into '25.

So it does feel like just a calendar year shift and we should see stuff on '25. How about longer term visibility on the business? Previous guidance had kind of given some revenue thoughts on where the business could head. I know you haven't done that today, but how comfortable are you on looking at kind of longer term trends to the business? Kind of the private question as well. Investors are trying to get a sense of visibility and growth in a small cap name.

So Rick, we haven't provided guidance beyond '24. And we will provide that here later in the year as well as some of our strategy beyond '24. But really, our strategy is to continue to deliver on all of the investments we've made in the last couple of years with our own self-funded programs. Continue to expand upon those programs with government funded activity. We mentioned in my prepared remarks, the $91 million in '23, the $155 million in '22 that was awarded. These are programs being built now in '24, '25 into '26. That's a great foundation to move forward. We really do like our strategy, Rick. We've got international markets, market leadership, positions in broadband. We've got gigabit solutions to 70% to 99% of all those markets. 5G networks rolled out. It's really just in this conversion of this investment phase to moving into our free cash flow generation optimization phase internationally. In our U.S. markets, we've got, again, a very strong foundation in carry and wholesale. We have a very large total addressable market for telecommunications in the areas that we serve. And that really is the opportunity ahead of us. Building good infrastructure, taking more of that total addressable share in our 2 U.S. markets is a great opportunity. And I think we've got a great foundation strategy to do it. We've got to execute. We've got to continue to focus on delivery to be able to deliver shareholder value, deliver value to our customers, and overall value to all of our stakeholders.

Rick, I just want to add, I think when you look at the business, we're transitioning. We've said we're going to focus on cash generation. And I think when you look at the level of CapEx compared to prior years, certainly it's aligned with that. So when you look at our financial framework transition, there's a couple of elements that are already in place when you think about more of the mid to long-term. We talked about more normalized CapEx levels in between 10% and 15% of revenues. We've also signaled that from a longer term perspective, even though we're experiencing some bumps here and there with our leverage, we're committed to bring it closer to 2x over time. And I think when you look at those elements, those are all pointing to cash generation down the road. I think the other element that we have to complete, is the piece of all the margins and that's going to be the focus for the coming months. As I mentioned in my remarks, I've been closely focused on margin improvement opportunities. We're currently at the 20s in adjusted EBITDA. So there's certainly room for improvement there. And we all understand that there's short term opportunities. There are things that might take a little more time, but there's room there. And that's where we're going to find the additional financial strength to improve those return to shareholders. It's critical.

All right. And to echo Robert's comments from earlier. But it's not just small capital liquid names like 18 Comcast down 7% today. So even large cap companies are having a tough time in the public markets right now when there is competition or when there's some delays and stuff. So okay, wish you well. Glad you're focusing on the margins as well as the pretty cash flow.

Thank you very much. This concludes our question-and-answer session. I would now like to turn it back to Brad Martin for closing remarks.

Thank you all for joining today. We look forward to speaking with you in the months ahead. Thank you again for your time. Take care.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Have a good day.